China’s financial engagement with Africa faces a new setback due to the ongoing conflict in Sudan, putting at risk loans worth over $5 billion.
Sudan has been a major recipient of Chinese financing in Africa, with China being the largest bilateral lender on the continent.
However, the power struggle between rival generals in Sudan has not only brought war to the capital, Khartoum, but also hindered China’s strategic goals in the Horn of Africa.
Sudan’s debts to China, which stood at $5.12 billion in early 2022, do not include oil prepayment facilities, which may add billions to the total debt stock.
Furthermore, Sudan’s ability to repay its creditors, including China, has been further jeopardized by the conflict, and the country is already in arrears on its external debts.
This debt situation is not unique to Sudan, as Chinese state-owned lenders are experiencing defaults across Africa.
In the past, China viewed Africa as a promising continent for growth, but now almost 80% of its total lending to Africa goes to countries in financial distress.
Zambia has already defaulted, while Angola, Ethiopia, and Kenya are struggling to honor their external debt obligations.
Chinese creditors’ willingness to write off loans or provide rescue credit remains largely untested.
While China has appointed a special envoy to the Horn of Africa to promote peace and cooperation, the complex situation in Sudan makes significant gestures unlikely in the near future.
The debt challenges faced by African countries have been exacerbated by rising global interest rates, the impact of the COVID-19 pandemic, and local economic factors.
This situation is expected to worsen in 2023, limiting the ability of African nations to finance social improvements and address climate change.
China, despite its financial involvement, appears cautious about playing a peacemaking role in Sudan.
Other countries, such as European nations, have a better understanding of the main actors in the Sudanese conflict.
However, considering China’s past shuttle diplomacy efforts in Sudan after the split with South Sudan, it wouldn’t be surprising if China engages in efforts to help resolve the current challenges.
