China’s vast investment in Africa hits a snag in Congo
- African nation’s request to the International Monetary Fund for help to get its finances back on track serves as a cautionary tale for Beijing
- IMF can lend only if it judges a country’s debt load is sustainable, and a bailout may be accompanied by a restructuring of government debt
China’s investment strategy of throwing money at developing countries appears to have hit a snag in the Republic of Congo as the central African nation is seeking a bailout from the International Monetary Fund.
While the funding it provided to Congo was not part of the “Belt and Road Initiative”, which China was promoting this week, it serves as a cautionary tale of the trouble Beijing could face with its plan for massive investments in maritime, road and rail projects across 65 countries from Asia to Europe and Africa.
When the plunge of global oil prices in 2014 blew a hole in the Congolese government’s finances, it was China that stepped in to help.
But despite the recovery of oil prices, the country, also known as Congo-Brazzaville, has had trouble getting back on top of its finances and has asked the IMF for help.
The IMF places conditions on its loans to force governments to take measures to boost their finances. Also, as the IMF can lend only if it judges that a country’s debt load is sustainable, a bailout may be accompanied by a restructuring of government debt.