US Treasury Secretary Janet Yellen said it was critically important to restructure Zambia’s debt, as she visits the African nation as part of a trip to the continent designed in an attempt by the Biden administration to increase the American influence in the region after years of neglect.
Yellen added in her comments on Monday that Zambia’s debt overhang was a drag on the country’s economy and that China had been a barrier to reaching a resolution on the southern African country’s debt problem.
She was confident that Zambia’s debt-restructuring process would soon as the move was in the interest of creditors as well, as Zambia faces a delay in the process.
It follows the International Monetary Fund’s approval of a $1.3 billion bailout last August, aimed at kick starting the country’s ailing economy and restructuring its debt.
Zambia’s total public debt to foreign and local lenders was just shy of $27 billion at the end of June 2022, according to its Ministry of Finance.
Yellen had landed in Zambia after starting the 10-day tour in Senegal last week which will culminate in South Africa.
In Dakar, she had said, “The United States is all in on Africa, and all in with Africa,” she said. “And our engagement is not transactional. It’s not for show. And it’s not for the short term.”
“Russia’s war and weaponization of food has exacerbated food insecurity and caused untold suffering,” Yellen said. “And with global economic headwinds caused by the actions of a single man, [Russian] President [Vladimir] Putin is creating an unnecessary drag on Africa’s economy.”
Yellen also acknowledged Africa’s susceptibility to the climate crisis, noting that 17 of the world’s top 20 climate-vulnerable countries are African.
There are sceptics in Africa
Yellen’s trip to Africa aims to show the continent the United States is a true partner, one here for the long-haul. But after decades of losing ground to China and the tumult of the Donald Trump years, when the former president threatened to slash aid and roll back military support, it is a tough sell.
As Africa struggles with economic headwinds caused by the COVID-19 pandemic, the war in Ukraine and, notably, Washington’s own monetary policy, Africans are asking for proof the United States will stay the course this time.
Yellen, so far, is at pains to make guarantees. “I don’t know how I can give assurances, honestly,” she said in an interview. But Republicans and Democrats alike support long-standing initiatives, including in the areas of health and trade, she said.
Yellen’s trip kicks off a year of high-level U.S. visits that will include President Joe Biden, Vice President Kamala Harris, Trade Representative Katherine Tai, and Commerce Secretary Gina Raimondo.
Washington hosted African leaders from 49 countries and the African Union at a summit in December, where Biden said the United States was “all in” on Africa’s future and planned to commit $55 billion over the next three years.
African officials have broadly welcomed the United States’ renewed engagement. But the timing, two years into Biden’s four-year term, is viewed by many as “late and somewhat half-hearted”, said Chris Ogunmodede, a Nigerian researcher and associate editor of World Politics Review.
“The fears that Biden will not follow through, or that he could lose and be replaced by a hostile Republican administration, definitely exist,” he said.
The China factor and US policy
As the United States touts its long-standing ties to Africa and a renewed commitment to ramping up trade and investment, it’s playing catch-up with China and facing a growing challenge from Russia.
Chinese trade with Africa is about four times that of the United States, and Beijing has also become an important creditor by offering cheaper loans than Western lenders.
American officials – both Democrats and Republicans – have criticised China’s lending as lacking transparency and predatory.
In Senegal, Yellen warned Africa against “shiny deals that may be opaque and ultimately fail to actually benefit the people” and has accused China of dragging its feet on a critical debt restructuring in Zambia.
But the US fiscal policy is creating its own drag. African countries have become collateral victims of this year’s rate hikes by the US Federal Reserve, aimed at curbing inflation at home.
“Tightening financial conditions and the appreciating US dollar have had dire consequences for most African economies,” the African Development Bank wrote in a report last week.
The cost of debt service is expected to hit $25 billion next year according to the World Bank, up from $21.4 billion in 2022. In local currency term, it’s risen even faster, increasing the risk of debt distress, the African Development Bank stated.
African countries are also finding it harder to access capital markets to meet their fiscal needs and refinance maturing debt.
The United States, meanwhile, has largely failed to offer viable alternatives to cheap Chinese credit, officials said. “China is an important partner,” Democratic Republic of Congo Finance Minister Nicolas Kazadi said. “It is clearly shown that it’s not easy to mobilise US investors.”
African countries have largely rejected US pressure to take sides in the Russia-Ukraine conflict, some of them citing Moscow’s colonial-era support for their liberation movements.
Russia has blocked Ukrainian grain exports, driving up food inflation and aggravating one of the worst food crises in Africa’s history, US officials note.
On Friday, Yellen said in Senegal that the war was hurting the continent’s economy, and that a Group of Seven-led price cap on Russian crude oil and refined products could save African countries $6 billion annually.
On Monday, though, South Africa hosted a visit by Russian Foreign Minister Sergei Lavrov and defended its decision to hold joint naval exercises with Russia and China off its east coast next month – a day before Yellen was scheduled to arrive.
Washington, Beijing and Moscow are all courting African nations with their own interests in mind, say foreign policy experts including Ebrahim Rasool, a former South African ambassador to the United States. African leaders, hoping for greater representation in bodies like the G20 and UN Security Council, can play that game too.
“The US sometimes has good intentions and meetings but not always the follow-through,” Rasool said, adding that sometimes Russia and China are needed to stir the US into action.