Resource-Backed Loans in Sub-Saharan Africa

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

The Political Economy of Chinese Debt and International Monetary Fund Conditionality

“…19 China has extensively used these arrangements in other developing and emerging market economies. For historical background in Sub-Saharan countries and specificities of these oil-for-loans arrangements and commodity-backed loans, see Bräutigam (2011) , Corkin (2016) , and Mihalyi et al (2022) . 20 In the case of Angola, Corkin (2011) reports that the interest rate on these loans was 1.5 percent above Libor for 17 years, including a grace period of 5 years.…”

Chinese and Indian economic relations and development assistance to Zimbabwe: Rationale, controversies and significance

“…Thus, these loans present some systematic risks and challenges in debt sustainability as they are expensive, benefit only the government elites and are contracted without the public consent (Munday, 2021). The general lack of openness in Chinese deals to African governments including Zimbabwe coupled with less demanding terms and conditions makes them susceptible to abuse by despotic regimes, and these loans usually do not benefit the majority of the citizens (Chivanga & Monyai, 2020; Mihalyi et al, 2020).…”

“…While it is difficult to quantify in monetary terms all the development assistance received by Zimbabwe from China, it is contributing little in terms of foreign direct investment (FDI), sharply contrasting with what Zimbabwe's neighbours are getting from China since 2003(Landry, 2021). China has been supporting Zimbabwe mainly through resource-backed loans (RBLs), particularly with minerals from the diamond mining sector, where African countries access loans in exchange for, or collateralised by, future streams of income from their natural resource wealth(Mihalyi et al, 2020; UN Conference on Trade and Development [UNCTAD], 2021). Chinese RBLs to Zimbabwe are mainly to finance projects in the mining, infrastructure, the wood industry, healthcare, water and sanitation, financial services, tourism, manufacturing and agricultural sectors (Republic of Zimbabwe, 2021a).…”

Donor Contracting Conditions and Public Procurement: Causal Evidence from Kenyan Electrification

“…The recent growth of Chinese state lending to low-and middle-income countries (LMICs) has been subject to related debates (Mihalyi et al 2022;The Africa Report, 2022). The Chinese government states its approach is one of non-interference in local policy-making and politics (State Council 2011), and highly streamlined procurement procedures.…”