As insinuations mount that China is heaping Africa with debt, Dr.
Akinwumi Adesina, President of the African Development Bank (AfDB), has denied the alleged debt crisis in African countries.
He spoke on the sidelines of the Forum on China-Africa Cooperation (FOCAC) Beijing Summit.
Western nations accused China of hoodwinking poor African nations into debt overload.
“Let
me be very clear that Africa has absolutely no debt crisis,” Adesina
told the press after a discussion at the High-level Dialogue Between
Chinese and African
Leaders and Business Representatives, which was closed Tuesday as part
of the FOCAC Beijing Summit.
me be very clear that Africa has absolutely no debt crisis,” Adesina
told the press after a discussion at the High-level Dialogue Between
Chinese and African
Leaders and Business Representatives, which was closed Tuesday as part
of the FOCAC Beijing Summit.
“African
countries are desperate for infrastructure. The population is rising,
urbanization is there, and fiscal space is very small,” the AfDB
president said.
countries are desperate for infrastructure. The population is rising,
urbanization is there, and fiscal space is very small,” the AfDB
president said.
“They are taking on a lot more debt, but in the right way.”
Africa
saw an overall debt-to-GDP ratio of 37 per cent last year, which,
albeit up from 22 per cent in 2010, is within the reasonable range for
low-income countries,
Adesina said.
saw an overall debt-to-GDP ratio of 37 per cent last year, which,
albeit up from 22 per cent in 2010, is within the reasonable range for
low-income countries,
Adesina said.
He
stressed that the ratio is markedly lower than 100 per cent or 150 per
cent of many higher-income countries and over 50 per cent of emerging
economies.
stressed that the ratio is markedly lower than 100 per cent or 150 per
cent of many higher-income countries and over 50 per cent of emerging
economies.
For
years, China has been providing money-starved African countries with
loans that are urgently needed to build roads, power plants, and
factories, as infrastructure
is considered the precondition for African countries to propel
industrialization and achieve prosperity.
years, China has been providing money-starved African countries with
loans that are urgently needed to build roads, power plants, and
factories, as infrastructure
is considered the precondition for African countries to propel
industrialization and achieve prosperity.
China
is saddling poor nations with unsustainable debt, Ray Washburne, head
of the U.S. Overseas Private Investment Corporation (OPIC) alleged
recently.
is saddling poor nations with unsustainable debt, Ray Washburne, head
of the U.S. Overseas Private Investment Corporation (OPIC) alleged
recently.
According to him, the large-scale infrastructure projects run by the Chinese are not economically viable.
Washburne is not the first to warn of growing debt linked to Chinese infrastructure projects.
International
Monetary Fund (IMF) Managing Director Christine Lagarde in April
cautioned China’s Belt and Road partners against considering the
financing as
“a free lunch”.
Monetary Fund (IMF) Managing Director Christine Lagarde in April
cautioned China’s Belt and Road partners against considering the
financing as
“a free lunch”.
Sri
Lanka formally handed over commercial activities in its main southern
port in the town of Hambantota to a Chinese company in December as part
of a plan to
convert $6 billion of loans that Sri Lanka owes China into equity.
Lanka formally handed over commercial activities in its main southern
port in the town of Hambantota to a Chinese company in December as part
of a plan to
convert $6 billion of loans that Sri Lanka owes China into equity.
Meanwhile,
African observers say that Chinese investments in Africa will not add
any debt burden to the continent. In the long run, they will ease it.
African observers say that Chinese investments in Africa will not add
any debt burden to the continent. In the long run, they will ease it.
Chinese
loans are mainly dedicated to the infrastructure in Africa, which is
the prerequisite to attract the foreign direct investment. If a country
has good
infrastructure, the investors will come and they will create jobs and
generate more income for the governments.
loans are mainly dedicated to the infrastructure in Africa, which is
the prerequisite to attract the foreign direct investment. If a country
has good
infrastructure, the investors will come and they will create jobs and
generate more income for the governments.
Prior to FOCAC, China downplayed confrontation that it is saddling developing countries with unsustainable levels of debt
China’s
ministry of commerce explained that that mounting debt was already
commonplace before incursion of China into the continent.
ministry of commerce explained that that mounting debt was already
commonplace before incursion of China into the continent.
Yet
worries over high debt levels associated with Chinese-backed projects
have been in the spotlight in the recent weeks, particularly after
Malaysian Prime
Minister Mahathir Mohamad’s visit to Beijing earlier this month, in
which Chinese projects worth of tens of billions were left “canceled for
now” over debt concerns.
worries over high debt levels associated with Chinese-backed projects
have been in the spotlight in the recent weeks, particularly after
Malaysian Prime
Minister Mahathir Mohamad’s visit to Beijing earlier this month, in
which Chinese projects worth of tens of billions were left “canceled for
now” over debt concerns.
Controversy
also came in December when the state-owned China Merchants Holdings Co.
Ltd. gained control of the Sri Lankan port of Hambantota on a 99-year
lease
as the government sought to negotiate spiraling debts to Chinese
creditors.
also came in December when the state-owned China Merchants Holdings Co.
Ltd. gained control of the Sri Lankan port of Hambantota on a 99-year
lease
as the government sought to negotiate spiraling debts to Chinese
creditors.
In
April, International Monetary Fund President Christine Lagarde
cautioned that foreign partners should not consider Chinese-backed
infrastructure projects
a “free lunch,” and last month a U.S. development official told Reuters
that Chinese projects were leaving African countries saddled with
unsustainable debt.
April, International Monetary Fund President Christine Lagarde
cautioned that foreign partners should not consider Chinese-backed
infrastructure projects
a “free lunch,” and last month a U.S. development official told Reuters
that Chinese projects were leaving African countries saddled with
unsustainable debt.
Chinese
Commerce Vice Minister Qian Keming looked to parry concerns over
Chinese projects in Africa in a news conference (link in Chinese),
arguing that debt
issues in Africa long preceded the rise of Chinese investment there,
and that challenges facing African economies were global in nature.
Commerce Vice Minister Qian Keming looked to parry concerns over
Chinese projects in Africa in a news conference (link in Chinese),
arguing that debt
issues in Africa long preceded the rise of Chinese investment there,
and that challenges facing African economies were global in nature.
“The
world economy has been in a difficult recovery, global trade and
investment have been sluggish, and commodity prices have fluctuated at a
low level,” he
said.
world economy has been in a difficult recovery, global trade and
investment have been sluggish, and commodity prices have fluctuated at a
low level,” he
said.
Chinese President Xi Jinping
had also been emphatic as he warned firms that the funds
provided by the country are not for “vanity projects” in Africa but are
to build infrastructure that can remove development bottlenecks.
had also been emphatic as he warned firms that the funds
provided by the country are not for “vanity projects” in Africa but are
to build infrastructure that can remove development bottlenecks.
The President also warned the firms to respect local people and the environment where projects were being executed.
Xi
said at a business forum before the start of a triennial China Africa
summit their friendship was time-honoured and that China’s investment in
Africa came
with no political strings attached.
said at a business forum before the start of a triennial China Africa
summit their friendship was time-honoured and that China’s investment in
Africa came
with no political strings attached.
“China does not interfere in Africa’s internal affairs and does not impose its own will on Africa.
“What
we value is the sharing of development experience and the support we
can offer to Africa’s national rejuvenation and prosperity,” Xi said.
we value is the sharing of development experience and the support we
can offer to Africa’s national rejuvenation and prosperity,” Xi said.
“China’s
cooperation with Africa is clearly targeted at the major bottlenecks to
development. Resources for our cooperation are not to be spent on any
vanity
projects but in places where they count the most,” he said.
cooperation with Africa is clearly targeted at the major bottlenecks to
development. Resources for our cooperation are not to be spent on any
vanity
projects but in places where they count the most,” he said.
China
has denied engaging in “debt trap” diplomacy but Xi is likely to use
the gathering of African leaders to offer a new round of financing,
following a pledge
of $60 billion at the previous summit in South Africa three years ago.
has denied engaging in “debt trap” diplomacy but Xi is likely to use
the gathering of African leaders to offer a new round of financing,
following a pledge
of $60 billion at the previous summit in South Africa three years ago.
