“If you wanted to raise money for something, you slapped a BRI label on it,” Minxin Pei, professor of government at Claremont McKenna College in California, told Euromoney. Chinese President Xi Jinping was keen on promoting the Belt and Road Initiative. Some experts suggest it is possible that at the beginning Beijing was perhaps unaware of just how much money was flowing out. But with economic decision-making centralized in the presidency, the lack of publicly available information on the loans from Beijing and the absence of rigorous management systems enforced allowed some Zambian officials to inflate project costs and receive kickbacks. In recent years, Zambia had borrowed from China for infrastructure improvements on roads, energy, railways, telecommunications, and two state-of-the-art international airports. Only two months ago, work was completed on a new $60 million conference center in the capital Lusaka, a gift from China. In late 2020, China wrote off $113 million interest-free loan debts due to mature in 15 African countries.Ĭhinese-backed infrastructure developments in Zambia date back to the 1970s as they do in many other African countries.

Faced with international pressure surrounding its no-strings lending practices and accusations of “debt-trap diplomacy,” China has been scaling back on African Belt and Road Initiative programs and being more cautious on how it lends by shifting away from massive infrastructure projects.Īt a summit attended by African officials, China recently announced that it would cancel interest-free loans in 17 African countries. Zambia is asking for $8.4 billion in debt relief from its foreign creditors, including China, over three years, according to IMF analysis published on Tuesday.Ĭhina is Zambia’s single biggest creditor with around $6 billion thought to be owed to Chinese financiers. In 2020, Zambia became the continent’s first pandemic-era defaulter on its foreign debt, estimated at around $17.3 billion. The coronavirus pandemic and other global shocks exacerbated the country’s economic decline. Under former President Edgar Lungo, Zambia’s economy faced crippling debt, a weakened currency and high inflation blamed on corruption and state mismanagement. “Growth has been too low to reduce rates of poverty, inequality, and malnutrition that are among the highest in the world.” “Zambia is dealing with the legacy of years of economic mismanagement, with an especially inefficient public investment drive,” the IMF said in a statement. As part of the 38-month arrangement, the IMF will release an immediate payment of $185 million. Following the deal, Zambia’s kwacha became the world’s best performing currency against the dollar on Thursday, after being the worst-performing last year, gaining 18 percent this year. Zambia’s struggling economy has been given a boost through a $1.3 billion loan agreement from the International Monetary Fund.

China defaults