Lower-income countries’ external debt payments to private lenders remain three times higher than payments to China, research shows, shedding light on the complex, costly web of creditors they face as they struggle to keep up repayments.
The research, by advocacy group Debt Justice UK, underscores the power private lenders - from bondholders to commodity trading houses - have in countries across the developing world which juggle debt repayments with spending on other needs, from education to infrastructure.
Tim Jones, policy director at Debt Justice, said the data countered a narrative that China has played a primary role in creating debt crises in lower-income countries.
China has lent hundreds of billions of dollars for infrastructure and other projects in developing countries and has used earnings of commodity exports, or cash held in restricted escrow accounts, from borrower nations as security for the loans.
"Commercial high-interest lenders are receiving the greatest debt payments by lower-income countries," Jones said in a statement. "Where debt payments are too high, all external creditors need to cancel debt, in proportion to the interest rates they charged."
While a post-pandemic wave of defaults has largely crested, developing countries still struggle with unsustainable debt as concessional financing shrinks, borrowing costs remain high and spending needs for infrastructure and climate resilience rise.
Ethiopia is locked in debt restructuring negotiations with bondholders who have rejected taking haircuts, while Ghana and Zambia are still negotiating deals with some private creditors.
