Private lenders take triple the debt payments China gets from developing countries

Lower-income countries are paying private lenders three times more than they send to China on external debt, according to new research from UK-based advocacy group Debt Justice.

• Lower-income countries allocate a significant portion of external debt repayments to private lenders, exceeding amounts paid to China.
• Research shows that from 2020-2025, 39% of $354 billion external debt repayments from lower-income nations go to private creditors.
• China's share of these external debt repayments is relatively smaller, at 13%, challenging narratives about its role in global debt issues.

Lower-income countries are paying private lenders three times more than they send to China on external debt, according to new research from UK-based advocacy group Debt Justice.

The findings highlight the costly mix of creditors these countries face, from bondholders to commodity traders, as they juggle high-interest repayments with urgent spending needs in education, infrastructure, and climate resilience.

Debt Justice policy director Tim Jones said the data challenge the prevailing narrative that China is the main driver of debt distress in developing economies.

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China has lent hundreds of billions of dollars to developing countries, often securing loans against commodity export earnings or cash in restricted escrow accounts, Reuters reported.

However, the research indicates that between 2020 and 2025, 39% of external debt repayments by 88 lower-income countries and small island developing states, totalling $354 billion, will be directed to private lenders.

That compares with 34% to multilateral institutions, 14% to other governments, and just 13% to Chinese public and private lenders.

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Multilateral repayments surge

Of the 32 countries with the highest debt service burdens, 21 send over 30% of their payments to private creditors. Only six of them, Angola, Cameroon, the Congo Republic, Djibouti, Laos, and Zambia, sent more than 30% of their external debt payments to Chinese lenders.

The study also shows a significant increase in repayments to multilateral lenders, rising from $30 billion in 2020 to $70 billion by 2025, driven by borrowing during the pandemic era. Many of those loans are now coming due, while floating interest rates have pushed costs higher during the global rate-hiking cycle.

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