China suspends debt repayments by Samoa
China has suspended debt repayments from 77 developing nations and regions including Samoa, as part of wider efforts to assist countries recover from the COVID-19 global pandemic.
The debt repayment suspension was announced by China’s Vice Foreign Minister Ma Zhaoxu on June 7 as part of his country’s work with the G20 to implement the G20 Debt Relief Initiative for low-income countries.
“China has actively participated in and acted upon the Debt Service Suspension Initiative of the G20. It has so far announced the suspension of debt repayments from 77 developing countries,” Mr Zhaoxu said in a press conference in China.
The Chinese Vice Foreign Minister did not identify the countries whose debts repayments were suspended by Beijing. However, it is understood the 77 countries are the borrowing states listed in the World Bank’s International Development Association, and categorised according to the continents and regions that they are located in.
Samoa has been grouped under the East Asia region and comprises 14 nations including the Pacific states of Fiji, Kiribati, Marshall Islands, Federated States of Micronesia, Papua New Guinea, Solomon Islands, Tonga, Tuvalu and Vanuatu.
A Shanghai-resident and Shanghai University Turkish Studies Center researcher, Adnan Akfirat, stated in an analysis on China’s debt repayment suspension announcement that the 77 nations’ debt principal and interest payments will be suspended for four years.
Questions have been sent by the Samoa Observer to the Chinese Embassy in Apia seeking comment on the announcement by the Chinese government and to confirm the duration of the debt repayment suspension.
Lowy Institute Research Fellow, Alexandre Dayant, told the Samoa Observer in an email response that the announcement by China is good for Samoa as it will create “fiscal space” for the country.
“The fact that China accepted to suspend the principal and interest payments of debts for four years is great news for Samoa. Indeed, China is by far the main bilateral creditor of the country,” he said. “On a yearly basis, debt servicing to China accounts for a little less than 1 per cent of Samoa’s G.D.P. The suspension will therefore create an additional fiscal space that is needed by the country in the short term to keep its economy afloat.”
When asked to comment on the long-term impact of the debt repayment suspension, Mr Dayant said: It is too early to evaluate the impact of this measure on the medium to long term. Indeed, the impact of the crisis is yet to precisely be known, and we are not sure how long it will last.”
The announcement of the debt servicing initiative by the G20 was not lost on the Research Fellow. He recommended that the measures be extended in order to benefit developing nations like Samoa.
“Currently, the debt standstill of development partners will expire by the end of the year and the enhanced access to the I.M.F. [International Monetary Fund] rapid financing windows will revert back to normal levels from 5 October. Yet, financing needs in response to Covid-19 will likely persist well beyond these arbitrary dates. So the measure needs to be lengthened.”
Another option Samoa can consider, according to Mr Dayant, is for it to consider multilateral and private sector creditors.
“For Samoa, this would free another 1 per cent of G.D.P. each year, which I am sure would be most welcomed by your government,” he added.
The G20 is an international economic cooperation forum for governments and central bank governors representing 19 countries and the European Union.