China has been accused of setting a debt trap, where it lends money to underdeveloped countries and then prepares to seize its assets. In many ways, Beijing’s intention echoes that of the European colonial powers.
The latest in a series of this aggressive Chinese game plan is fears that it could wrest control of Uganda’s only international airport. The East African country is failing to repay the $ 200 million loan it borrowed from the Export-Import Bank of China in 2015. Both Kampala and Beijing are trying to allay fears of a Chinese takeover of Entebbe International Airport.
But many questions remain. A parliamentary inquiry last month found that China had imposed tough conditions on the loan, including potential confiscation of the airport in the event of default. Ugandan lawmaker Joel Ssenyonyi, who chairs the committee that conducted the parliamentary inquiry, said the loan agreement gives the Export-Import Bank of China (also known as Exim Bank) powers to approval on the annual budgets of the airport. Ssenyonyi warned that the terms of the loan allow China to take over the airport in the event of default. In a social media posting the journalist-turned-politician said Ugandan Finance Minister Matia Kasaija admitted the terms of the loan were unfair. Kasaija also apologized to parliament last week for the mismanagement of the EXIM bank loan.
According to reports, according to the agreement, China’s Exim bank is authorized to inspect both the Ugandan Civil Aviation Authority and the government’s books. The clause clearly erodes state sovereignty. Uganda secured the loan in 2015 from China’s Exim Bank, one of several lines of credit the country has acquired from China over the past 15 years to finance infrastructure projects, including roads and roads. power stations.
CHINA’S GROWING INFLUENCE IN AFRICA
Uganda is not alone. China is present in 39 African countries. It has deployed billions of dollars in loans under its Belt and Road Initiative (BRI) which analysts say has many suspicious clauses. Critics have often accused the Communist regime of “seizing” the assets of countries unable to pay off their debts.
Like Uganda, neighboring Kenya is feeling the heat of hostile Chinese actions. There are fears that China could take over the port of Mombasa if the country defaults on a $ 3.2 billion loan. It is interesting to note that it is the same bank, namely Exim Bank, which granted the loan. Here, too, the Kenyan government has allayed fears that Beijing would not risk seizing national assets if the country defaults on loans taken to finance the loss-making standard gauge railway.
Djibouti, a country of a million people in the Horn of Africa, is another classic example of Xi Jinping’s debt diplomacy. In 2017, Djibouti’s debt was estimated at 88% of its GDP. And China was responsible for most of that debt. This gave China the opportunity to build its first overseas military base there.
HOW CHINA OBTAINED THE PORT OF HAMBANTOTA IN SRI LANKA
In 2017, Sri Lanka handed over control of the newly built Hambantota port to a Chinese operator. Here, too, Colombo was unable to fully repay the debt to its Chinese lenders. Madagascar, the Maldives, and Tajikistan are other examples of nations bowing under Chinese debt. The plot is simple: promise to build infrastructure, use predatory lending practices and when the debtor country does not repay, force it to either cede its domestic assets or give China strategic leverage.
CHINA’S DEBT TRAP IN PAKISTAN
Another example is Pakistan. According to the International Monetary Fund, until April 2021, Pakistan owes 27.4% of its foreign debt of $ 24.7 billion to China. The China-Pakistan Economic Corridor Project (CPEC), which aims to link the port of Gwadar in Pakistani Balochistan to China’s Xinjiang Province, is the flagship project of China’s ambitious multibillion-dollar BRI. According to the US Institute of Peace, with growing debt, Islamabad allows China to use “debt trap diplomacy” to access its strategic assets.
But there are also opponents. Experts say accusing China of engaging in deliberate “debt trap” diplomacy is not fair, according to a report from the Lowy Institute. But the same report warns that the scale of China’s lending and the institutional weakness of Pacific states put small states at risk of being overwhelmed with debt.
(Disclaimer: The views of the author do not represent those of WION or ZMCL. WION or ZMCL also do not endorse the views of the author.)