China now allays fears of ‘debt diplomacy’

Sunday May 12 2019

Ethiopian PM Abiy Ahmed and Chinese Premier Xi Jinping

Ethiopian PM Abiy Ahmed and Chinese Premier Xi Jinping at the second BRI forum in Beijing last month. Analysts have estimated that since the year 2000, Ethiopia has borrowed over $12 billion from China. PHOTO | XINHUA 

ONYANGO K'ONYANGO
By ONYANGO K'ONYANGO
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Beijing has downplayed accusations that it is pressurising African countries that have been recipients of its loans to pay back the money or seize their assets.

Tian Lin, the China International Development Co-operation Agency’s spokesperson and also the director general of international co-operation, said among countries that acquired loans from Beijing, none was being pressured to pay back.

“China has never pressured any country to pay back its loans; these are things spread by Westerners who are not happy with the initiative China has taken towards spurring economic growth of Africa,” said Mr Tian on Thursday, when he met African and Asian journalists under the 2019 China Africa Press Centre and the China Asian Pacific Press Centre

Mt Tian said there are no political strings attached to China’s co-operation under Belt and Road Initiative (BRI). He insisted that China’s aid is given through equal and friendly consultation.

'Politically indebted'

Most countries from the West including the United States of America have been accusing China of engaging in ‘‘debt diplomacy’’ by burdening African countries with debt so that they become ‘‘politically indebted.’’

Mr Tian explained that as a way to enhance bilateral ties with countries, President Xi Jinping’s administration will offer more debt relief to some African countries and provide some with interest-free loans.

He said that ensuring debt is tied to interest-free loans had long been a part of China’s policy in Africa and the country will adhere to the principles of ‘‘giving more and taking less,’’ ‘‘giving before taking’’ and ‘‘giving before asking for return.’’

“China will forgive some of the debts that developing countries owe; the Chinese government has never put pressure on recipient countries that face challenges in paying back,” he said.

This comes after last month’s cancellation of all interest-free loans China had advanced to Ethiopia as at the end of year 2018, and cancelling of Cameroon’s $78 million debt early in the year.

Analysts have estimated that since the year 2000, Ethiopia has borrowed over $12 billion from China – including funding for the Addis Ababa–Djibouti electric railway linking the country to the Red Sea port in Djibouti, its main supply route.

Mr Tian also cited instances of cancellation of loans interest following expiration of time for a recipient country to repay, saying China had adopted a flexible approach through bilateral negotiation.

Real needs

He added that China will not do things that are not in line with the real needs of beneficiary countries, and would strive to prevent countries becoming heavily indebted.

Currently, in East Africa, Nairobi will pay Chinese state-owned lenders nearly Ksh82.85 billion in the year starting July, with Ksh36.24 billion in the current year ending June.

In May 2014, Kenya entered into a deal to borrow $3.233 billion from China’s Exim Bank, comprising $1.633 billion commercial loan and $1.6 billion concessional loan to build the 385km-long Mombasa-Nairobi standard gauge railway. The loan is to be repaid in 15 years.

The deal to fund the first phase of the line, Kenya’s single largest infrastructure project by cost since Independence, saw Beijing overtake Tokyo as Kenya’s largest bilateral lender.

Debt repayments to Beijing will account for a third of the Ksh274.24 billion debt that Kenyan projects will be due to foreign lenders in 2019-20.

However, during the Second Belt and Road Forum (BRF) last month, Beijing announced that it will help BRI member countries to adopt stable and sustainable finance arrangement to defuse the ‘‘debt trap’’ concern.

Speaking on financial connectivity at the forum, last month, Chinese Minister for Finance Liu Kun underscored that it was crucial for the BRI member countries and China to come up with a framework to handle debt issues.

“Stable and sustainable finance management is a long term responsibility of BRI and as a ministry, we will continue to work with finance ministers of the member countries and other financial institutions like the World Bank and International Monetary Fund to promote high quality and high standard finance systems for BRI projects globally,” said Mr Liu.

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