Biti Warns African Countries That They Face a Bleak Future over Debt

Former Finance Minister and current MDC vice president Tendai Biti has warned African countries that debt owed by African countries is ballooning and come 2024, most countries will default.

Biti was speaking at an OSISA-organised conference on ‘Southern Africa’s Debt Conundrum’ in Johannesburg on Tuesday.

Below is part an abridged version of what Biti had to say by ZimLive.com:

Debt is increasing. You mention 18 countries that are in the red, but if you look at those 18 countries the bulk of those countries are struggling with traditional debt which is contracted from traditional sources – the London club of creditors, the Paris Club of creditors and the IFIs, in particularly the World Bank, the IMF and the African Development.

But the structure of loan contracting has changed, there are now players, insidious players that have entered the market in a big way. The first one I want to mention is of course China.

China has very unorthodox methods of lending to African countries. They also tend to take some shortcuts; their due diligence is a mixture of politics and economics.

So there’s no set objective standard when it comes to Chinese loan contraction, but Chinese debt is huge and Chinese debt is now populating the balance sheets of most of these African states.

The problem with Chinese debt is that it escapes the traditional scrutiny of the IFIs, in particular, the IMF which has played the de facto role of a debt enforcer on behalf of the Paris club of lenders, the London club of lenders, the World Bank and so forth.

China is outside that. In other words, China can lend to a country notwithstanding that its debt to GDP ratio is unsustainable, the net present value of exports to GDP is unsustainable and that has been happening, Zimbabwe is a good example.