The external debt of low- and middle-income countries (LMICs) has changed dramatically over the past decade, outpacing their economic growth and raising serious concerns. The situation is even worse for poorer countries, whose external debt is growing fastest compared to other small and medium-sized countries. Additionally, debt vulnerabilities have worsened in many low-income countries eligible for International Development Association (IDA) funding.
Debt accumulation in these countries has increased so much that more than 60% of IDA-eligible countries are at high risk of debt crisis in 2023. According to the World Bank’s 2023 International Debt Report, LMIC external debt levels decreased slightly by 3.4% from $9.3 trillion in 2021 to $9.0 trillion in 2022. However, IDA-eligible countries saw a similar increase compared to the previous year. 2.7%, reaching a record high of $1.1 trillion.
Over the last 20 years, China’s economy has grown at one of the quickest rates, with average annual increase in gross national income of more than 13%. In terms of the global foreign debt situation, China is in an intriguing place. Although it is the biggest borrower inside the same group, it is also considered the greatest bilateral creditor to LMICs. From 2012 to 2022, China accounted for almost 40% of all net financial inflows to LMICs. During this time, China received $4 trillion in net financial inflows from external creditors, of which 32% were debt-creating flows and the remaining 68% were equity inflows in the form of foreign direct investment and portfolio equity.
Look at top 5 countries most in debt to China.
5. Kenya
Total external debt to China (2022): $6.69 billion
Kenya is the fifth largest country with the highest debt to China. It is an East African country whose Indian Ocean coast is a historically important port connecting Africa with the Arab and Asian regions. The country owes a total of $6.69 billion in Chinese foreign debt in 2022.
4. Ethiopia
Total external debt to China (2022): $6.82 billion
Ethiopia ranks fourth on the list as the country with the highest debt to China. It is a landlocked country in Africa, and its total external debt to China in 2022 will reach $6.82 billion.
3. Sri Lanka
Total external debt to China (2022): $8.84 billion
Sri Lanka is an island country in the Indian Ocean. It is located in a strategically important location at the crossroads of shipping routes through the Indian Ocean. Sri Lanka owes a total of $8.84 billion in foreign debt to China in 2022.
2. Angola
Total external debt to China (2022): $20.98 billion
Angola is a South West African country that ranks second on the list of countries with the highest debt to China. Luanda is the capital and commercial center, characterized by a large port on the north coast and a modern industrial park. The country will owe a total of $20.98 billion in Chinese foreign debt in 2022.
1. Pakistan
Total external debt to China (2022): USD 26.6 billion
Pakistan is the country with the largest total external debt to China, and the total external debt to China in 2022 will reach USD 26.6 billion. It is a country in South Asia, neighboring China, India, Afghanistan, and Iran.
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