COVID-19 Africa Watch talks to Scott Morris, Senior Fellow at the Center for Global Development, about the the implications of Chinese lending contracts for debt relief from other international creditors.

Key Takeaways

Below are a few of the main takeaways from COVID-19 Africa Watch’s conversation with Scott Morris, Senior Fellow at the Center for Global Development, and co-author on the recent landmark report How China Lends, the first systematic analysis of the legal terms of China’s foreign lending.

• Development finance and access to external finance are critical for developing market governments, not just in crisis periods but also for long-term infrastructure financing. China has been a key source of this type of finance for Africa.
• The analysis of Chinese contracts, however, reveals unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt, and Chinese lenders often seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no Paris Club” clauses).
• Cancellation, acceleration, and stabilization clauses in Chinese contracts potentially provide policy levers, allowing the lenders to influence debtors’ domestic and foreign policies.
• African countries arguably need to scrutinize the nature of the commitments they are making through debt contracts. At the same time, other bilateral lenders as well as the international community need to be more sensitive to the debt risks that these countries are facing, and to do more to provide countries with more viable financing alternatives.

The interview was conducted by Walter Pacheco, an IFC-Milken Institute Capital Market Scholar, who is the CEO of the Angolan Stock Exchange.