image source,Anadolu / Getty
Malpass, president of the World Bank, was in Niamey a few days ago to promote education as a tool for economic development.
World Bank president David Malpass told the BBC he was concerned regarding some Chinese lending to developing African economies.
He said the terms and conditions needed to be “more transparent”.
African countries, including Ghana and Zambia, are struggling to repay their debts to Beijing.
China said the loans were made within international rules.
Developing countries often borrow from other countries or multilateral institutions to finance their infrastructure, education and agriculture, among other things.
Most of the borrowing is denominated in dollars or euros, but a sharp increase in interest rates in the United States and other major economies last year has made repayments more expensive.
This is especially difficult for developing economies, as the relative value of their national currencies has fallen, making it harder to find the extra capital they need.
Malpass described it as a “double whammy, it means (economic) growth will slow down”.
US-China competition
U.S. Vice President Harrison visited Ghana’s capital, Accra, and was warmly welcomed by Vice President Mahamudubbaumia, who is seeking to strengthen economic ties with the country.
U.S. Vice President Kamala Harris visited three African countries last week, mainly to deal with related challenges, and made huge promises of financial support to Tanzania and Ghana.
The United States and China are increasingly competing for influence in Africa. The continent is rich in natural resources, including the metal nickel, which is vital to electric vehicle batteries.
“The United States is not thinking regarding what we can do for our African partners, but what we can do with our African partners,” she said, speaking in the Ghanaian capital Accra.
Visiting a new nickel processing facility in Tanzania, Harris said the project, which will supply the U.S. and other markets by 2026, will “help address the climate crisis, build resilient global supply chains, and create new industries and jobs.” “.
World Bank President Malpass said that competition between the world’s two largest economies “should be healthy for developing countries” because it offers alternatives.
“What I would strongly encourage is that their contracts be transparent. That’s always been an issue; if you write a contract and say ‘don’t show it’, that’s a minus point. So avoid that.”
He also warned: “For governments in Africa, they should not offer collateral as an inducement for loans, because it binds generations. This has happened in China.”
In recent years, China has become one of the largest sources of lending to developing economies. Globally, China provided $185bn (£150bn) in aid to 22 countries between 2016 and 2021, according to a new study by the IfW (Kiel Institute for the World Economy) .
Beijing has refuted claims that China uses financial aid to exploit other countries.
Foreign Ministry spokesman Mao Ning said at a regular press conference last week that China “respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay debts, will not attach any political conditions to loan agreements, and will not seeking any political self-interest”.
Malpass noted that these problems are not unique to Chinese financing, but the situation is improving.
“If you think regarding the history of lending in the West, sometimes it’s not in the entire interest of the people of the country. Even World Bank loans are not always in the best interest of a country.”
“So what we’re trying to do, and what everyone should be trying to do, is improve the quality of loans.”
“One of the ways is to split the loan, which is if there is an investment project, say you are building a train, describe what the project and the cost will be, and then arrange financing separately. If you bundle them together, it is very difficult. Know, whether I’m on the train or getting a good deal on the financing.”
food and energy issues
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Ghana’s finance minister, Ken Ofori-Atta, traveled to Beijing last month to hold talks on debt repayment restructuring. The country also received $3 billion from the International Monetary Fund in December.
The outgoing World Bank president is also concerned that rising food, fertilizer and energy prices due to the war in Ukraine are draining government budgets in poorer countries. Fortunately, the price increases are now starting to ease.
“The immediate crisis is over, but what remains is that countries are not using enough fertilizers and the soil is becoming infertile. So next year production is expected to be lower than normal.”
“A subsistence farmer, she’s not getting fertilizer, and now her land isn’t producing that much, how is she going to feed her family and her community? That’s the big problem. What we’re going to do is use fertilizer and food directly. to help the nations.”
The World Bank is concerned that these challenges will further push up poverty rates. Affected by the new crown epidemic, the global extreme poverty rate has risen from 8.4% to 9.3%, which is the first increase in history, which means that a large number of people live on less than $1.90 a day.
The World Bank is regarding to hold a spring joint meeting with the International Monetary Fund (IMF) in Washington, hoping to raise more funds to solve current problems.
“The target is there,” Malpass said. “But the demand is much greater than the amount of money coming in.”
