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This paper ties together the macroeconomic and microeconomic evidence on the competitiveness of African manufacturing sectors. The conceptual framework is based on the newer theories that see the evolution of comparative advantage as influenced by the business climate—a key public good—and by external economies between clusters of firms entering in related sectors. Macroeconomic data from purchasing power parity (PPP), though imprecisely measured, estimates confirms that Africa is high-cost relative to its levels of income and productivity. This finding is compared with firm-level evidence from surveys undertaken for Investment Climate Assessments in 2000-2004.
After more than a decade of financial sector liberalization, both of domestic markets and of international financial transactions (capital account liberalization), policymakers in many developing countries remain concerned about the effects that large and highly volatile capital flows have on their financial systems. However, in spite of the tremendous costs associated with the resolution of crises and signs of discontent among the population with the outcome of some reforms, to date there is no significant evidence indicating a reversal of the reform process. While one could advance a number of hypotheses explaining this "commitment to reforms," developing countries’ decisions and actions seem to indicate that policymakers perceive capital inflows as a necessary component to achieve growth and development.
Bread for the World, CGD, and the Millennium Challenge Corporation are jointly hosting an event with the Prime Minister of Cape Verde and the Millennium Challenge Account CEO, Paul Applegarth to analyze Cape Verde's recent MCA Compact.
China's loans aren't debt traps, researchers say, but interest rates are consistently higher than World Bank
Center for Global Development
WASHINGTON – As the COVID-19 economic crisis brings about rising concerns over debt sustainability in developing countries, a new report from the Center for Global Development (CGD) finds that China's loans tend to have shorter grace periods and maturities and higher interest rates than loans from the World Bank.
“With developing countries taking an economic hit from the COVID-19 pandemic, there’s a real concern about debt risks in developing countries—many of which were already at risk of debt distress. China is now the largest bilateral lender in the world, so decisions made in Beijing have a huge impact on the economies of developing countries,” said Scott Morris, a senior fellow at CGD and an author of the report.
“We found that China's loans have consistently contained harder terms than the World Bank, particularly for the poorest countries. Most of the discussions of debt vulnerability in developing countries have focused on the overall amount of borrowing, but the shift in loan terms matters a lot too,” said Brad Parks, the executive director of AidData and an author of the report. “That said, while we have concerns, we don’t find evidence for the ‘debt trap’ narrative. A few percentage points more in interest compared to the World Bank hardly seems usurious.”
With a lack of official Chinese government data on its lending programs, the researchers created a database of 2,453 loans from China and 4,859 loans from the World Bank for comparison, spanning 157 countries and 15 years. Data includes loan-by-loan information on interest rates, maturities, and grace periods, including for projects that fall under the Belt and Road Initiative.
Total Financing (USD)
Average Loan Size (USD)
Average Grant Size (USD)
Total Number of Projects
Volume of Grants (% total financing)
Volume of Loans
Weighted Mean Interest Rate
Weighted Mean Maturity (years)
Weighted Mean Grace Period (years)
“It's clear that developing country governments find value in China’s lending, compared to what they can get on the markets. But it's incredibly important that the Chinese government, which has a stated commitment to debt sustainability, carry out its lending program in a way that doesn’t heighten debt risks in its partners,” Morris said.
“The IMF and the World Bank are calling for lenders to step up and help developing countries with their debt obligations during the crisis. As one of the world’s leading creditors, this is a good opportunity for Beijing to show that it’s sensitive to debt risks.”
The full report and dataset are available at https://www.cgdev.org/publication/chinese-and-world-bank-lending-terms-systematic-comparison
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