On Thursday, Jang Ping Thia, who is the lead economist and manager of the economics department at the Asian Infrastructure Investment Bank and an ambassador of an African country to China, expressed his disapproval of the loan policy of the International Monetary Fund and the World Bank. He said that their debt sustainability framework in his opinion is not suitable. He added that infrastructure loans should be properly coordinated and appropriately scheduled with regard to the capacity of those concerned to absorb the debt.
BEIJING — Ibrahima Sory Sylla, the ambassador of the West African country of Senegal to China, expressed his criticism of the International Monetary Fund and the World Bank Thursday at Peking University for their limiting lending policies. He proposed that alternative ratings should be generated, taking into account factors such as food security, which are not typically considered by Fitch or Standard and Poor's. These agency ratings are the foundation for IMF and World Bank evaluations of economic sustainability. According to Reuters in December, the United Nation's World Food Programme recorded a 40% rise in those suffering extreme lack of food in West Africa in one year, with East Africa recording a 60% increase. Senegal has increased their borrowing from China in 2021 and 2022, as shown in the Chinese Loans to Africa database belonging to Boston University's Global Development Policy Center.
Despite the spike in borrowing from West Africa, loan activity was more moderate in other parts of the continent, contradicting the growth that had been seen over the last two decades, according to the data. Sylla of Senegal noted that while the G20 had required countries to take part in a debt suspension initiative, when they did, they were still downgraded in terms of their risk despite the fact that western nations are allowed to have a debt to GDP ratio of up to 200%. CNBC received no response to its request for comment from the IMF, World Bank, and Standard & Poor's. A Fitch Ratings spokesperson, however, said that all their ratings decisions are based solely on one outlined criteria that is globally uniform and accessible to the public. They further noted that ratings decisions are made through independent, reliable, transparent, and timely analyses.
Jang Ping Thia, lead economist and manager of the economics department at the Asian Infrastructure Investment Bank, expressed his belief that IMF and World Bank officials are convinced their debt sustainability framework is of benefit to the world. He noted that they often strive to do what they can for the countries they work with. After returning from Africa two weeks ago, Thia observed a brand-new city constructed by Chinese contractors but with very little occupants, causing him concern. Stressing the importance of timing, debt control, and the capability to absorb the loans, he suggested that gradual construction and increased occupancy would be more efficient than ambitious projects.
Just days prior to the third Belt and Road forum, at which Russian President Vladimir Putin is slated to attend on Tuesday and Wednesday in Beijing, an event was held concerning Chinese financing in Africa. Critics of the China-driven initiative of infrastructure development suggest it is a way of expanding the country's global influence and putting poor nations in a position in which they cannot repay debt accrued for such development. According to a report from Peking University's Institute of New Structural Economics, from 2000 to 2020 China loaned $160 billion to African countries, with the research indicating that each 1% rise in Chinese loans caused a 0.176% increase in African economic growth. Allan Joseph Chintedza, Malawi's ambassador to China, said the report should also consider the loan repayment timeline. He also noted that in order for Malawi to borrow more from the IMF, it has to receive a "sustainability letter" from the Chinese government. Chintedza stated that the majority of loans must be extended if the country is to breathe and meet the requirements of investing in social projects.
Since 2000, Malawi has borrowed $484.6 million from China according to the Chinese Loans to Africa Database, which does not track repayments. Wu Peng, director-general for the department of African affairs at China's foreign ministry, commented that "the financing cooperation between China and Africa [are] facing some challenge or difficulties due to some [countries] defaulting and the debt problem [being] in front of us." He added, however, that he still has "confidence that we still can cooperate in this field." Peng also announced that he was working with Chinese banks on loans for railway projects in Western Africa, which should be revealed "in weeks."
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