Are Chinese infrastructure loans putting Africa on the debt-trap express?
- Beijing has lent billions of dollars to countries on the continent to build railways, highways and airports but critics say the borrowings are unsustainable
- Chinese officials say the projects will pay off in the long run and host nations are well aware of their limits and needs
When Clement Mouamba went to Beijing last year, he had two main tasks.
The prime minister of the Republic of Congo needed to find out exactly how much his country owed to China, a number the struggling, oil-rich central African nation had until then not been able to provide the International Monetary Fund (IMF) to qualify for a bailout. He also needed to convince Beijing to restructure its debt to ensure sustainability.
The IMF had put talks for further loans on hold until Mouamba’s administration could say exactly how much it had to repay to the country’s external creditors, including China – the republic’s single largest bilateral lender – and oil multinationals such as Glencore and Trafigura.
The country, which heavily depends on oil revenue, turned to China and private oil majors for funding to run the government when in 2014 oil prices fell from a high of US$100 per barrel to as low as US$30.
The Republic of Congo has since restructured its borrowings from China, which holds about a third, or US$2.5 billion, of the Congolese debt, by extending the repayment period by an additional 15 years.
A number of other African countries struggling to service their loans from Beijing have also pursued concessions. Ethiopia has had part of its Chinese debt written off and terms relaxed for the US$3.3 billion loan it took to build its railway, while Zambia is seeking similar adjustments for its borrowings used to build airports and highways.