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Japan’s steps up lending to Africa amid drop in Chinese contributions

Africa-Funding from Japan increases while assistance from China thins

Japan is slowly increasing its lending to Africa amid thinning assistance from China, even as the latter remained the largest bilateral lender to the African countries. Amid economic slowdown and rising debt levels the world’s second largest economy has been tightening its purse strings. 

Sample this. Beijing is expected to provide Kenya $254.9 million in 2022-23, “a sharp cutback from $1.2 billion” in the 2015-16 budget.

“That marks the second year in a row that China will trail Japan in bilateral loans,” having committed $183.9 million in the current year ending June against Tokyo’s $315.7 million” the East African in its report said.

Though China’s lending to Kenya has slowed, the overall exposure is far higher than Japan. Until last year, Kenya owed China $6.95 billion with several large infrastructure projects underway compared to $1.42 billion to Japan.

"China will now focus most of its attention to the domestic issues which are affecting its economic indicators, GDP growth is slowing down while debt is rising–given this situation, Beijing's focus will not be Africa at this point though the continent is of utmost importance," an analyst told India Narrative.     

According to the Carnegie Endowment for International Peace, the nature of Chinese loans to Africa is changing. Chinese loans to Africa peaked in 2019 when large amounts were directed towards the Belt and Road Initiative. But since then, Chinese loans to Africa have been slowing down, data revealed.  A sectoral decomposition of Chinese loans shows that more than 65 percent of lending goes to infrastructure sectors, it said, adding that in comparison, traditional lenders—mostly from Europe and North America as well as Japan in the OECD-Development Assistance Committee (OECD-DAC) countries—focus more than half – about 55 per cent of their financial assistance—a mixture of grants and loans—on social sectors like health, population, education, and humanitarian aid.

In 2019, former Japanese Prime Minister Shinzo Abe at the seventh Tokyo International Conference for African Development (TICAD) assured the African countries of “limitless support” related to investments and innovation.

Last year, Japan signed a $668 million loan agreement with the African Development Bank (AfDB) to support the African countries amid the Covid 19 pandemic.

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