9 August 2019
by ANGELO FERRARI
International Monetary Fund (IMF) and World Bank worry that Chinese loans increase African debt, which has doubled in the last five years
The port of Doraleh, Djibouti
African countries contract debts with Beijing which they are unable to repay. An imbalanced relationship has been established between China and Africa that generates perverse effects. The International Monetary Fund (IMF) and the World Bank are concerned that Chinese loans increase African debt, which has doubled over the past five years – with the risk of it becoming unsustainable – and that Beijing holds 14%.
The effects are perverse and it is demonstrated by the decision of the IMF to launch a rescue plan worth 450 million dollars in favor of the Republic of Congo. The credit program – as Africarivista.it writes – aims to support the efforts of the Congolese authorities to restore fiscal sustainability and rebuild regional reserves, while improving the governance and protection of associated risks. A nice plan that goes in favor of an unscrupulous dictator, Denis Sassou Nguesso, in power since 1979. One wonders what this gentleman has done for the country in its forty years of power. From the conditions in which the population lives, just over 5 million inhabitants on a surface as large as Italy, little or nothing. People living below the poverty line are around 40% of the total.
Congo Brazzaville is one of the five major oil producers in sub-Saharan Africa, with around 350,000 barrels a day, 80% of its exports depend on oil, and has estimated reserves of 1.6 billion barrels. A country, we could say sufficiently rich to satisfy the primary needs of the population. However, the entire economy of the country depends on crude oil, economic diversification is a mirage, the cultivated lands represent only 4% of those available and agriculture is subsistence.
The country, therefore, relies on China and now also on the International Monetary Fund, as happened in the past. The IMF has asked the Brazzaville government to guarantee the long-term sustainability of its debt as a prerequisite for the approval of a credit program lasting at least three years, prompting the country to reach a preliminary agreement for the restructuring of a part of its debt with China. The point is always that.
At the end of March, Brazzaville’s debt to China was approximately $ 2.56 billion. According to the terms of the restructuring agreement, as explained by Africarivista.it, the repayment of a sum equal to 1.6 billion dollars has been extended for another fifteen years, while about 530 million will have to be repaid by the end of 2021. Here that explains the intervention of the IMF.
China arrives, helps you, but then asks for the bill. In this situation there is not only the Republic of Congo, but also other African countries. Just a few examples. Let’s start from Kenya. The port of Monbasa, among the largest and busiest in East Africa, was used as a guarantee for the loan of 3.2 billion dollars for the construction of the 470 km railway line between Mombasa and Nairobi. If Kenya does not pay the debt, the Exim Bank of China will take control. Not only that, the port of Lamu, on the border with Somalia, could be sold for 99 years to China if Nairobi does not fulfill the conditions for repayment of the loans. Don’t forget that these are strategic infrastructures for the country.
Djibouti. This piece of land in the Horn of Africa is the site of China’s first permanent military base abroad. Beijing has invested 15 billion dollars to encourage the expansion of the main port and related infrastructure. 82% of the country’s foreign debt is held by China and in the event of default Djibouti could be forced to cede Dorale to the Chinese for control of the strategic port, for the whole of the Horn of Africa.
Zambia. The country’s external debt is around 9.37 billion dollars, if state debt is added up to 15 billion. One third of the total is due to China. The debt to Beijing is now reaching unsustainable levels. Lusaka airport could soon fall into Chinese hands, as well as the national electricity company (Zesco), while already 60% of Zambian National broadcasting Corporation (Znbc) is owned by a Chinese company.
Certainly Chinese neo-colonialism cannot be confused with development aid.