New Delhi, March 7 (IANS) China’s long-standing resource-backed lending model in Africa is increasingly coming under criticism from experts and development authorities, according to a new report.
The model -- which ties loans to future commodity exports such as oil, copper, and cobalt -- has been widely used across the continent to finance infrastructure projects, but its sustainability is now being questioned, Daily Monitor said in its report.
The African Development Bank (AfDB) has raised concerns over the approach, with President Akinwumi Adesina describing the loans as “asymmetrical” and “non-transparent” and calling for an end to resource-backed lending (RBLs) in African nations.
Critics argue that China’s shift from lending to debt extraction is straining national budgets and threatening economic stability, according to the report.
While Chinese financing fuelled an infrastructure boom for over two decades, the post-COVID slowdown and reduction in new loans have exposed vulnerabilities.
“Tethering repayment to volatile commodity markets has left countries like Venezuela and Angola caught in a “creditor trap,” forcing higher resource exports to service debts,” Daily Monitor mentioned.
The model’s structure also encourages corruption and mismanagement, as loans are tied to Chinese state-owned contractors through non-competitive bidding, often producing substandard infrastructure.
Examples include Ecuador’s Coca Codo dam, which failed to deliver the projected economic returns.
The outcomes for African nations vary widely. Angola has used its oil revenues to reduce outstanding debt from $10.2 billion to $8.9 billion in the first half of 2025, stabilising its debt-to-GDP ratio around 9 per cent.
In contrast, Kenya struggles under the burden of the Chinese-funded Standard Gauge Railway, allocating $1 billion annually from a $33 billion budget to service debt, with obligations restructured in Chinese yuan, the report said.
Experts say China’s resource-backed debt model, once hailed as “patient capital,” is evolving into a cycle of economic and ecological vulnerability.
As easy credit disappears, borrowing nations must balance mounting debt against domestic development priorities, raising questions about the long-term sustainability and equity of the approach.
--IANS
ag/na