The external debt situation for low- and middle-income countries (LMICs) has significantly worsened over the past decade, with debt growing faster than economic development.
This issue is particularly severe in poorer countries, where external debt has surged the most.
In 2023, more than 60% of low-income countries eligible for International Development Association (IDA) resources were at high risk of debt distress.
According to the World Bank’s International Debt Report 2023, while overall external debt for LMICs slightly decreased by 3.4% from $9.3 trillion in 2021 to $9.0 trillion in 2022, it increased by 2.7% for IDA-eligible countries, reaching a record $1.1 trillion.
The top ten countries with the highest external debt to China in 2022 were:
Pakistan
With a debt of $26.60 billion, Pakistan’s borrowing is largely attributed to the China-Pakistan Economic Corridor (CPEC) projects, which include a vast network of highways, railways, and energy projects designed to improve connectivity between the two countries.
Angola
Angola owes $20.98 billion to China. This debt has accumulated through loans for rebuilding infrastructure after the civil war and investments in the oil sector, which is a significant part of Angola’s economy.
Sri Lanka
Sri Lanka’s debt to China stands at $8.84 billion. The country’s financial obligations have led to concerns about debt-trap diplomacy, especially after the lease of the Hambantota Port to a Chinese company for 99 years.
Ethiopia
Ethiopia owes China $6.82 billion, which has been used for various infrastructure projects, including the Addis Ababa-Djibouti Railway and the development of industrial parks.
Kenya
Kenya’s debt to China is $7.4 billion, incurred through investments in infrastructure projects like roads and railways as part of the Belt and Road Initiative.
Zambia
Bangladesh
Bangladesh’s $6.05 billion debt to China has financed many key infrastructure projects, like power plants and bridges. These projects are vital for the country’s economic growth and development. However, the high level of debt raises concerns about fiscal sustainability. Bangladesh must carefully manage its debt to ensure it can benefit from these investments without falling into financial trouble.
Laos
Laos has a notable debt to China due to infrastructure projects like railways that aim to improve connectivity within the region.
Egypt
Egypt’s debt to China, totalling $5.21 billion, has been used for various infrastructure and energy projects, including the construction of the New Administrative Capital. These projects are crucial to Egypt’s efforts to modernize its infrastructure and attract foreign investment. However, this reliance on Chinese loans adds to Egypt’s external debt, making careful fiscal management essential to ensuring long-term economic stability and growth.
Nigeria
Nigeria ranks high among countries indebted to China, with specific debt figures not provided. The loans are likely for infrastructure projects as part of Nigeria’s economic development plans.
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