Financial statecraft of debtors – African governments and external finance
Can developing countries’ debt ever be a basis for independence rather than dependence? Conventionally, developing countries are thought to be at the mercy of international financial markets and dependent on international financial institutions for access to development finance. When can developing countries’ borrowing instead be a source of strength?
Over the last two decades, China has become one of the leading lenders in sub-Saharan Africa. Debates about China’s new role on the continent have focused on China’s motivations and the consequences for Western countries. These discussions have at times overlooked the consequences for the African governments at the receiving end of Chinese finance. Further, they have ignored the broader context of diverse external finance newly available to African governments, including private market finance.
In this book, I argue that an unparalleled diversity of lenders has allowed some African governments to turn borrowing into the basis for greater control over external affairs. Reducing their reliance on traditional donors, including the World Bank, the EU, and leading Western donors, gave borrowing governments greater leverage in negotiations with these traditional donors. As a consequence, governments received more funding for priority projects, discretion over contentious policies, and flexibility of financing.
I support my argument using cross-national data on Chinese development finance and data I collected on African sovereign bonds, as well as a detailed comparison of three countries that borrowed from China and in international bond markets in the last two decades: Ethiopia, Ghana, and Kenya.
Alexandra Zeitz 