At a summit meeting in Rome last month, Prime Minister Giorgia Meloni of Italy announced that the European Union was working on a multimillion-dollar plan to provide Africa with some debt relief. The move followed a $15.5 million bailout of Syria by Saudi Arabia and Qatar, erasing the war-torn country’s debt to the World Bank and helping a regional neighbor rebuild.
The steps are small given the magnitude of the crushing $8.8 trillion debt that weighs on poor and middle-income countries. Many of these nations spend more on interest payments than on schools and medical care.
Ideas for a more coordinated approach to debt and development financing will be discussed at a United Nations conference this week in Spain. But the outlook for comprehensive action is bleak. Twenty-five years ago, wealthy nations, including the United States, struck an extraordinary agreement to forgive hundreds of billions of dollars in debt owed by poor countries.
Today, President Trump’s retreat from multilateral organizations and relief programs, in addition to rising tensions between the United States and China, is hampering joint efforts to address the deepening sinkhole of debt.
But as the world’s wealthiest country withdraws, China could do more to relieve the strain on struggling economies, experts say.
No other country has lent more to Africa, Asia and Latin America than China. After a lending binge that began in the mid-2000s and gained momentum in the 2010s, China now accounts for nearly a third of loan repayments made by nations in these regions.
A decision by China to offer more debt relief could be a “game changer for the poor and the system,” said Kevin Gallagher, the director of the Boston University Global Development Policy Center.
“It’s really in China’s strategic interest to do that,” he added.
Since Mr. Trump was elected, China has stepped up efforts to increase its influence among developing nations and bolster its position as a global leader through trade, investment and international summits.
A recent report from the Lowy Institute, an Australian think tank, found that while China had vastly reduced its lending, Beijing had increased lending to places where it had political or strategic interests, including bordering countries such as Laos, Pakistan and Kazakhstan.
New loans for Honduras and Nicaragua also came through after their governments cut diplomatic ties with Taiwan in favor of China. The other recipients of Chinese loans are developing economies that have reserves of critical minerals or battery metals, like the Democratic Republic of Congo and Indonesia, Lowy found.
So far, Beijing has shown little interest in forgiving loans, even though it has frequently agreed to postpone repayments for short periods — most notably during the pandemic.
That may be surprising given China is the world’s second-largest economy. Brad Setser, a senior fellow at the Council on Foreign Relations, said it “still sees itself as a developing country.”
Mr. Setser said there were still creative ways that China could decide on its own to offer more help to debt-strapped nations: For instance, it could use the enormous pool of dollars it has accumulated through exports to access special reserve funds from the International Monetary Fund and make them available to debt-ridden nations.
“It’s a smart move for China, and it’s good for the world,” Mr. Setser said. It would help China diversify its assets, give the developing world access to low-cost financing and relieve pressure on the United States and Europe to put up more cash.
Mr. Setser and Mr. Gallagher were in Rome last month for a debt conference at the Vatican. Pope John Paul II helped lead what was known as the Jubilee campaign for debt forgiveness in 2000. Now Pope Leo, picking up an initiative started by Pope Francis, is pressing to halt the merciless cycle of unsustainable borrowing and bailouts to mark the 2025 Jubilee, referring to passages in the Bible about debt forgiveness.
A new Jubilee report detailed other steps that could be taken, including some that would not require U.S. participation. Most sovereign bonds for developing countries, for example, are issued in London and New York, but the regulations governing these transactions need to be reformed.
The New York Legislature as well as the British Parliament could amend rules to limit private equity funds from squeezing debtor nations for windfall profits and require creditors to be treated equally so that private lenders cannot hold out for better terms than public ones.
The gathering at the Vatican was just a couple of miles away from the summit where Ms. Meloni announced her plan for African debt relief.
The proposal from Italy’s right-wing prime minister is aimed at reducing migration from Africa to Europe. Italy has also launched an ambitious plan to increase investment on the African continent for the same reason.
Anti-immigrant sentiment helped put Ms. Meloni in office, just as it did with Mr. Trump. But she has expanded ties to the developing world, recognizing that crippling debt fuels economic distress and mass migration.
“By strengthening Africa, we strengthen Europe,” Ms. Meloni said. “Africa is a continent where our future is at stake.”
Patricia Cohen writes about global economics for The Times and is based in London.
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