China's loans to Africa worry World Bank President David Malpass

The president of the World Bank has told the BBC that he is concerned about some of the loans China has been making to developing economies in Africa.

David Malpass says the terms and conditions need to be “more transparent”.

It comes amid worries that countries including Ghana and Zambia are struggling to repay their debts to Beijing.

China says that any such lending is done within international rules.

Developing countries often borrow money from other nations or multilateral bodies to finance sectors that will grow their economies such as infrastructure, education and agriculture.

World Bank President David Malpass has been in Niamey this week promoting education as a tool for economic development

However steep increases in interest rates in the US and other major economies over the last year are making loan repayments more expensive because lots of that borrowing is done in foreign currencies such as US dollars or euros.

It is a particularly acute problem for developing economies who can struggle to find the extra money that is required as the relative value of their own currency falls.

It is a “double whammy and it means that [economic] growth is going to be slower”, says Mr Malpass.

US-China rivalry

Tackling that challenge and its consequences was one of the main reasons for this week’s visit by US Vice-President Kamala Harris to three African countries.

It is a visit that comes with big commitments of financial support to Tanzania and Ghana.

There is a growing rivalry with China for influence in the continent, whose abundance of natural resources include the metals, such as nickel, crucial for the batteries needed for technology such as electric cars.

Speaking in Ghana’s capital, Accra, she said “America will be guided not by what we can do for our African partners, but what we can do with our African partners”.

While highlighting a new nickel processing facility in Tanzania Ms Harris said the project would be supplying the US and other markets by 2026 and that it would “help address the climate crisis, build resilient global supply chains, and create new industries and jobs”.

US Vice-President Kamala Harris was warmly welcomed in Ghana’s capital, Accra,

That collaborative approach was praised by Mr Malpass who said the competition between the world’s two biggest economies was “maybe healthy for developing countries” as it provided different options.

“What I encourage strongly is that they be transparent in their contracts.

A new study led by the Kiel Institute for the World Economy shows that globally China lent $185bn (£150bn) in bailouts to 22 countries between 2016 and 2021.

China refutes suggestions that it is exploiting other countries with its financial support.

At a press conference this week Foreign Ministry Spokesperson Mao Ning said China “respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay, will not attach any political conditions to loan agreements, and does not seek any political self-interest”.

Finance Minister Ken Ofori-Atta travelled to Beijing this month for talks on restructuring its debt repayments.

Even World Bank loans haven’t always been for the best that could have been done in a country.”

“So what we’re trying to do, and I think everyone should be trying to do, is improve the quality of the lending.

“One of the techniques is to unbundle the loan, meaning if there’s an investment project, let’s say you’re building a train, describe the project and what the cost will be.

And then separately, arrange the financing.

“If you bundle them together, it makes it very hard to know, am I getting a good deal on the train or on the financing.”

Food and energy concerns

The outgoing World Bank president is also concerned that higher food, fertiliser and energy prices, as a result of the war in Ukraine, are sapping government budgets in poorer countries.

While that could deepen the economic challenges they face there is relief that price rises are now starting to ease.

“The immediate crisis is over but one thing that’s been left is that countries didn’t use enough fertiliser, so their soil is depleted.

What we’re trying to do is help countries directly with fertiliser [and] with food.”

Many of the world’s poorest economies have been hit hard by higher food prices as a result of the war in Ukraine

The World Bank is concerned that these challenges will worsen a first-ever increase in the global extreme poverty rate – people getting by on less than $1.90 per day.