Members of the Paris Club, mainly the richest Western nations, have provided debt relief to Angola to help the southern African nation weather the coronavirus storm. A statement released by the Paris Club on Tuesday said the member creditor countries have “accepted to provide to Angola a time-bound suspension of debt service due from 1st May to 31st December 2020”. “Angola is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the Covid-19 crisis,” the statement said. However, the statement did not provide finer details such as how much Luanda has benefited from the Paris Club debt service suspension under the G20 debt scheme. Angola is also seeking debt service suspension from all bilateral creditors, including from its single largest lender, China, in line with the agreed term sheet. The plan, known as the Debt Service Suspension Initiative (DSSI), offers relief for payment due between May and December this year to 73 low-income countries, mostly in Africa and some in Asia, affected by the pandemic. In the latest Paris Club relief, Luanda is expected to save US$310 million in deferred debt-servicing payments for May to December, said Mark Bohlund, a London-based senior credit research analyst for REDD Intelligence. Bohlund said the biggest relief will come from China if Beijing agrees to do the same and includes the loans from China Development Bank, which it has categorised as commercial lending. The World Bank wants the China Development Bank to participate in the G20-led debt standstill scheme. China and the West must not use African debt as a tool for influence, experts say Beijing has recently hit back, with Chinese Finance Minister Liu Kun saying the World Bank “should lead by example in suspending debt service”, or its role as a global leader in multilateral development will be weakened. If China agrees to provide debt relief for Angola, it would bring an additional US$2.3 billion in debt-service deferment for May to December and similar sums next year if the DSSI is extended, Bohlund said. Bohlund said China was likely to continue to prefer to agree to any debt restructuring or reprofiling (extending the maturities of the loans) on a case-by-case basis with individual countries. Last week, China’s Foreign Ministry said that since the G20’s debt service was adopted in April, Beijing had received requests from more than 20 countries and reached an agreement with more than 10 of them by the end of July. In July, the International Monetary Fund delayed the release of the next tranche of its loan to Angola, preferring to wait until the country secured debt restructuring with China. The IMF has used this approach in the past in the Republic of Congo (Congo-Brazzaville), where it suspended the release of money until the country restructured its loans with Beijing. Zambia has been in the same situation. Bohlund said the IMF appeared to be requiring a more extensive reprofiling of Angola’s loan to China to approve any disbursement of funds. But “more is likely to be required, including writedowns or debt-for-equity swaps, to assure Angola’s public-debt sustainability over the medium term”, he said. Angola is the biggest recipient of Chinese loans in Africa, getting about 30 per cent, or US$43.2 billion, of the US$148 billion Beijing loaned to the continent between 2000 and 2018, according to the China Africa Research Initiative at the Johns Hopkins School of Advanced International Studies in Washington. G20 agrees to debt freeze for poorest countries amid pandemic When the G20 debt deal is implemented fully, Angola will be the biggest beneficiary in Africa, receiving savings of about US$2.6 billion in repayments due in 2020, according to World Bank data. Angola’s official external debt stood at US$58 billion last year and is expected to increase to US$85.4 billion this year, according to the IMF. The country is struggling to service its debt after being badly hit by the coronavirus-driven oil rout, which saw Brent crude prices drop to their lowest level since the Gulf war in 1991 and US oil futures fall into negative territory for the first time in history. Oil accounts for two-thirds of Angola’s tax revenue and 95 per cent of its exports, mostly to China, according to the IMF. China asked to write off more African debts as coronavirus hits economies Bradley Parks, executive director of AidData, a research lab at the College of William and Mary in Virginia, said there was not much transparency around which DSSI applications have been approved. For example, he said, “we don’t know how banks in creditor countries are identifying the loans that are eligible for payment suspensions and the loans that are ineligible for payment suspensions”. Parks cited the case of Angola, where one of the country’s biggest creditors is China Development Bank (CDB), and Beijing has signalled that the bank will not participate in the DSSI. He said the decision has provoked controversy because the purpose of the DSSI is to suspend loan repayments to official creditors (state-owned banks) and CDB is a state-owned bank. “Beijing has tried to finesse this issue by taking the position that CDB lends at commercial rates, so it should be treated as a commercial creditor rather than an official creditor,” Parks said.