- Period of write off. The loans, which stand at a combined Shs7.5 trillion, were written off between 2000 and 2017 as new ones are being advanced already burdened economies.
Kampala. China has, in the last 17 years, forgive loans worth $2b (Shs7.5 trillion) advanced to various African countries.
Many of these loans had been advanced to fund ambitious infrastructure projects such as roads, dams and ICT development.
In Uganda, according to a 2018 report compiled by US-based Centre for Global Development, the world’s second largest economy, has, in about 17 years, written off loans in the excess of $67m (Shs252b).
The loans, the report indicates, had been written off between 2000 and 2017.
Uganda currently holds about Shs6 trillion in loans advanced by the Chinese government or state-funded banks and companies.
The Centre for Global Development report indicates that China wrote off the loans to open up a new chapter through the Belt and Road Initiative that seeks to achieve “shared growth”.
The Belt and Road Initiative is spread out in at least 68 countries with a Chinese funded investment portfolio estimated at about $8 trillion.
Much of the money under the initiative is majorly intended to be invested in transportation, energy, and telecommunications infrastructure with the aim to link up parts of Europe, much of Africa and Asia. In all this plan, China will be at the centre and the largest beneficiary.
China’s increasing influence through lending money that some countries cannot pay back, according to some analysts, has opened Africa to new challenges. Although many governments’ officials continue to dismiss the claim.
Asked if Uganda had asked for more debt write-offs, Mr Keith Muhakanizi, the secretary to the Treasury, told Daily Monitor yesterday there had been a policy announcement but government is yet to get the figures.”
Chain has been lending regardless of some country’s capacity to pay back the borrowed money.
Some analysts are calling it “debt-trap diplomacy” as such countries are forced into concessions when they default. For instance, according to the Centre for Global Development report, Sri Lanka, which holds about $1b in Chinese debt has been forced to surrender one of its ports to Chinese government-owned companies for a lease of 99-year.
In Africa, Zambia has been the largest beneficiary of Chinese debt relief after close to $259m was written off in the period between 2000 and 2017.
Another loan of $75m, which the country had jointly acquired with Tanzania was also written off with the period.
Ghana with $245.5m and Rwanda ($173m) have also benefitted in large write-offs over the period. Other countries including Cameroon, Kenya and Ethiopia, among others, have also seen several of their debts written off.
China, according to the report, has been accused of using conventional methods of debt relief, contrary to those used by multilateral organisations.
For instance, in 2011, China reportedly agreed to write off an unknown amount of debt owed by Tajikistan in exchange for some 1,158 square kilometres of disputed territory.
At the time, Tajik authorities said they only agreed to provide 5.5 per cent of the land that Beijing had originally sought.
However, China has moved aggressively to mitigate unsustainable debt risks with the country’s banking regulatory commission issuing regulations for China policy banks, emphasising greater risk controls for the overseas activities.
Excessive debt burdens have the potential to distort, a country’s investment profile.
However, Mr Basil Ajer, the acting Uganda Investment Authority executive director, told Daily Monitor yesterday that Uganda is still far from the danger zone because its debt “is at the moment sustainable and cannot affect the country’s investment climate”.