Over the past decade, external debt for low and middle-income countries has surged, outpacing economic growth and raising serious concerns. This trend is particularly evident in severely impoverished nations, where debt levels have significantly increased.
Global Debt to China Reaches $9 Trillion
Many low-income countries eligible for the World Bank’s International Development Association (IDA) resources are facing heightened debt vulnerabilities, with over 60% at high risk of debt distress as of 2023.
A report from the World Bank’s International Debt division shows that while the external debt for low and middle-income countries decreased marginally by 2.24%, from $9.3 trillion in 2021 to $9 trillion in 2023, it rose by 2.7% for IDA-eligible countries, reaching a record $1.1 trillion.
The World Bank data reveals the extent of each country’s debt to China, with external debt stocks representing the total amount owed to foreign creditors. The World Bank has listed the top 10 countries indebted to China as of 2022:
Pakistan: $26.60 Billion
Pakistan is the most indebted to China, with a debt of $26.60 billion, primarily due to the China-Pakistan Economic Corridor, a flagship project of China’s Belt and Road Initiative (BRI). This debt poses significant repayment challenges.
Angola: $20.98 Billion
Angola owes $20.98 billion to China, accumulated through loans for post-civil war infrastructure rebuilding. China’s investments in Angola’s oil sector, exchanging loans for oil shipments, have rebuilt the country but created a dependency on Chinese finance and increased vulnerability to oil price fluctuations.
Sri Lanka: $8.84 Billion
Sri Lanka’s debt to China, totaling $8.84 billion, has drawn international scrutiny, particularly following the 99-year lease of the Hambantota Port to a Chinese firm after loan defaults. This situation has sparked concerns about potential debt trap diplomacy and the loss of sovereign assets. Sri Lanka continues to face challenges balancing development needs with debt repayment.
Ethiopia: $6.82 Billion
Ethiopia’s $6.82 billion debt to China has been used for infrastructure projects, including the Addis Ababa-Djibouti Railway and various industrial parks. Political instability and the Tigray conflict exacerbate risks associated with high debt levels, potentially impeding economic progress and repayment capacity.
Kenya: $6.69 Billion
Kenya owes China $6.69 billion, primarily for infrastructure projects like the Standard Gauge Railway. Intended to boost connectivity and trade in East Africa, the project has faced criticism over high costs and uncertain economic viability, raising concerns about increased taxation and austerity measures.
Zambia: $6.08 Billion
Zambia’s $6.08 billion debt to China has funded mining and infrastructure projects, leading to economic difficulties, high debt burden, inflation, and currency devaluation.
Bangladesh: $6.05 Billion
Bangladesh’s $6.05 billion debt to China has financed infrastructure projects such as power plants and bridges, raising questions about fiscal sustainability.
Laos: $5.25 Billion
Laos owes $5.25 billion to China, mainly for the construction of the Laos-China Railway.
Egypt: $5.21 Billion
Egypt’s $5.21 billion debt to China has been used for infrastructure projects, including the New Administrative Capital.
Nigeria: $5.29 Billion
Nigeria’s $5.29 billion debt to China has funded infrastructure projects such as railways, highways, and power plants. Nigeria’s total external debt recently exceeded $43 billion, with Chinese loans being a significant component, bringing its total debt stock, including domestic and external debts, to over $100 billion.
