High interest rates in the West are the problem - the beginning of the figures lies in the US "debt trap" (II) Africa | debt | the US
In fact, the debt problem of developing countries is closely related to Western countries such as the United States. Developing countries have weak economic "hematopoietic" functions and cannot develop without borrowing foreign debt. Western financial institutions, in pursuit of profit, often encourage developing countries to issue large amounts of short-term high interest bonds, causing some debtor countries to face enormous debt pressure and have to raise new debts to repay old debts, creating a snowball that accumulates more and more.
The British "Debt Justice" organization released a report in 2022, saying that according to the data of the World Bank, 12% of African countries' government debt comes from China, and 35% from the West, especially western private institutions. The Chinese loan interest rate is 2.7%, while the Western loan interest rate is 5%, almost twice that of the Chinese side.
Christopher Mutswangwa, Secretary of Information and Propaganda for the ruling Zimbabwe African National Union Patriotic Front, pointed out that Western countries are the creators of every debt trap in Africa. He said, "In the past, in Africa, if you wanted funding, you would go to Paris, which was very expensive; trying to go to New York would be even more expensive; trying to go to London would be higher than the sky. The cost was too high. Come to China, the cost is low."
The financial hegemony of the United States is also a significant reason for some developing countries falling into debt crises. Some interest groups and financial institutions in the United States have joined forces to create debt crises in emerging market countries several times, seizing huge economic benefits from these countries. In the 1990s, Argentina took advantage of the international low interest rate environment to heavily borrow, and was also intoxicated by the United States with "neoliberalism". In 2001, the financial crisis broke out, and Argentina was forced to carry out debt restructuring twice in 2005 and 2010 due to its inability to repay its debts. Today, it is still plagued by debt problems and its development is in a predicament.