Japan is exploring ways to help African governments reduce high-cost debt repayments by redirecting international debt financing. The move comes as Tokyo faces fiscal pressures and rising right-wing populism, making it challenging to increase aid spending. Despite these challenges, Japan sees potential in offering concessional debt with lower interest rates to African countries.
Naoki Ando, senior vice-president of the Japan International Cooperation Agency, says that Japan will stick to its development assistance model over aid. The country has not suffered the same collapse in aid budgets as major donors such as the US, Germany, France, and the UK have faced. Instead, Japan can reduce debt servicing costs by converting high-cost debt into low-interest loans.
The initiative aims to create an alternative to China’s Belt and Road Infrastructure programme, which has contributed to Africa’s rising debt servicing costs. Japan’s foreign ministry says that if major ODA loan recipients such as ASEAN countries and India graduate from official development assistance, Africa could become the next major recipient of ODA loans.
However, Japan faces significant competition from Chinese lenders, with $182bn of loans committed to Africa since 2000. To overcome this, Tokyo will focus on small-scale infrastructure projects and capacity building in areas where China is not as competitive. This approach allows Japan to offer viable alternatives for inbound investment into African economies, hedge against China’s influence, and create its own path in the continent.
Source: https://www.ft.com/content/047dbacc-808e-4042-8679-f6b98341f4d4