The International Monetary Fund (IMF) has warned that China’s slow economic recovery will negatively affect the growth of Sub-Saharan African economies like Angola, and Nigeria, resulting in a 0.5 percentage point reduction in average growth.
In a statement released by the IMF, China is the region’s largest single-country trading partner, as it buys one-fifth of the region’s exports — metals, minerals, and fuel —and provides most of the manufactured goods and machinery imported in the region.
The international lender stated “However, China’s recovery from the pandemic has slowed recently due to a property downturn and flagging demand for its manufactured goods as global growth has also slowed,”
“This matters for Africa. A one percentage point decline in China’s growth rate could reduce average growth in the region by about 0.25 percentage points within a year, according to the latest Regional Economic Outlook. For oil exporters, such as Angola and Nigeria, the loss could be 0.5 percentage points on average,” it stated.
IMF noted that the ripple effects of China’s slowing economy extend to sovereign lending to sub-Saharan Africa, which fell below $1 billion last year—the lowest level in nearly two decades. The cutback marks a shift away from big-ticket infrastructure financing, as several African countries struggle with escalating public debt.
For instance, Nigeria’s debt to China rose from $3.93 billion on June 30, 2022, to $4.73 billion on June 30, 2023, an $800 million increase in a single year.
This represents a 20.36% increase from the second quarter of 2022 to Q2 2023, according to an analysis of the external debt stock data from the Debt Management Office (DMO).
The DMO office disclosed that China-funded loans were utilised for 15 projects spanning diverse sectors such as railways, airport terminals, water supply, power generation, communication, and agricultural processing.
“Chinese loans to the region rose rapidly in the 2000s, with the country’s share of total sub-Saharan African external public debt jumping from less than 2 per cent before 2005 to 17 per cent by 2021,”
“This makes China the largest bilateral official lender to countries in the region. However, the share of debt owed to China remains relatively small, at just under 6 per cent of the region’s overall public debt and is mostly owed by five countries—Angola, Cameroon, Kenya, Nigeria, and Zambia,” the IMF explained.
The IMF advised that sub-Saharan African countries will need to adapt to China’s growth slowdown and declining economic engagements by building resilience through increased inter-African trade, and by rebuilding buffers, including through tax policy reforms and improvements to revenue administration.
It added that efforts to diversify African economies are also vital to sustain future growth.