African States caught in China’s debt trap

Public debt in Africa no longer sits as a technical concern handled only by finance ministries. Over the past few years, debt became a major economic and political issue that involves every stakeholder in society.

In Senegal, the scandal surrounding President Macky Sall’s “hidden debt” pushed the debate back to the forefront. With public debt reaching 132 % of GDP, Senegal now stands as the second most indebted country in Africa, just behind Sudan.

What is debt exactly?
For a state, debt represents the money it borrows to fund its expenditure when its own revenues—taxes, duties, exports—fall short. This creates sovereign debt, which governments contract under different forms.

Domestic sovereign debt includes loans taken from national actors such as local banks, pension funds, or domestic investors. External sovereign debt comes from foreign creditors and exposes governments to geopolitical leverage and economic risks, especially currency volatility.

External debt falls into two categories. Bilateral debt, is borrowed directly from another state (for instance, China lending to Kenya) whereas multilateral debt, is issued by institutions like the World Bank, the African Development Bank, or the IMF.

Between 2015 and 2024, African countries saw their average debt-to-GDP ratio climb from 44.4 % to 66.7 %, driven by lower public revenues and successive global crises. Several defaults left a strong mark on the continent.

In 2022, Ghana abruptly ran out of options. Years of heavy borrowing for infrastructure and the collapse of revenues after Covid-19 and the war in Ukraine pushed public debt above 92 % of GDP. Rising global interest rates shut the door to refinancing, and the national currency, the cedi, plunged. The government halted payments on a large share of its external debt and turned to the IMF, which demanded austerity and deep restructuring, including losses for private bondholders. Ghana eventually stabilized the situation, but inflation soared, household purchasing power fell, and social tensions intensified—illustrating how a financial crisis can quickly turn into an economic and political storm.

China, a particularly disruptive creditor

Since the early 2000s, China has reshaped development financing in Africa. Western lenders and multilateral institutions tied their loans to strict conditions, while Beijing offered quick financing focused on major infrastructure. But none of this came free. Chinese loans often carry higher risks and higher interest rates than those from traditional development partners.

Nigeria, for example, requested several emergency loans from China during economic turmoil, but paid interest rates around 5 %, compared with the IMF’s typical 2 %. China also demands short repayment schedules, which place heavy pressure on public finances and push governments into new borrowing cycles. Many African states now struggle inside this debt spiral.

Between 2000 and 2023, China lent an estimated 182 billion dollars to 49 African governments and 7 regional organizations. In 2025 alone, developing countries owed China 35 billion dollars. According to the Australian think tank Lowy Institute, China now behaves far more like a debt collector than a development partner. By contrast, a country like Germany used only 8.4 % of its 2023 budget to service debt, while the world’s 46 poorest countries allocated nearly 20 %—despite already facing severe fiscal constraints.

Seizing infrastructure
When heavily indebted states cannot meet payment deadlines, China sometimes takes over the infrastructure it financed. In 2017, Sri Lanka failed to repay 1.4 billion dollars for the Hambantota port project and had to hand the port to a Chinese company under a 99-year lease !

The port of Hambantota
Many analysts, including Indian expert Brahma Chellaney, argue that China grants loans with full knowledge that borrowers will struggle to repay them. This strategy helps Beijing secure strategic assets abroad. Observers often refer to this as “debt-trap diplomacy.”

The major challenge: restructuring debt

When a country can no longer meet its repayments, debt restructuring becomes essential to restore a sustainable fiscal path. In practice, this means the debt service—the combination of principal and interest—outgrows available resources.

Not all creditors approach restructuring in the same way. Some countries agree to reduce African debt, but other creditors adopt a tougher stance.

China tends to impose unilateral and opaque conditions that complicate international coordination. It refuses to join the Paris Club, an informal group of Western creditors that seeks collective and lasting solutions for over-indebted countries. Beijing usually prefers bilateral, confidential negotiations. Zambia and Ethiopia’s cases illustrate this pattern: despite efforts from multilateral institutions and international partners, China delayed comprehensive agreements by imposing its own terms, prolonging financial and political uncertainty.

Private creditors also show little flexibility. “Vulture funds” specialize in buying distressed debt at a discount and then seek maximum returns during restructuring.

These dynamics shape the environment in which more and more African states find themselves trapped by debt. In this context, Ousmane Sonko’s decision not to restructure Senegal’s debt may seem understandable. Only time will tell whether his stance will prove as “viable” as he claims.

Ousmane Sonko in Senegal's National Assembly

Kwaku Osei

   Comments0