East African Countries Now Owe China $29.4 Billion in Infrastructure Loans.

THE BIG PICTURE: East African economies have, in the past 10 years, borrowed $29 billion to grow their shipping and transportationcommunicationmanufacturing, and energy sectors. The region’s economies are now spending almost eight percent their revenues to service these loans, which analysts say are becoming a burden, especially given that their impact is yet to be seen on the growth.

Chinese state institutions, private banks have given African governments $143b in loans in the past 17 years. The latest data from the China-Africa Research Initiative (Cari) at John Hopkins University shows that Ethiopia owes Beijing $13.73 billion, followed by Kenya at $9.8 billion. Uganda owes $2.96 billion and Tanzania $2.34 billion.

Rwanda, South Sudan, and Burundi owe China the least amounts — $289 million, $182 million and $99 million respectively.

The level of debt owed by African governments in countries such as Kenya, Uganda, Mozambique, and Tanzania has increased markedly since the 2008 financial crisis. Problematic though sub-Saharan African debt may be, debt levels vary country by country and therefore mitigate the possibility of a continent-wide crisis. Still, widespread default could create opportunities for outside powers that covet the region’s natural resources.

Mega projects

All these funds went into the transport sector, followed by power, communications, and manufacturing. Ethiopia’s biggest intake of the Beijing loans was in 2013, coinciding with the launch of its joint standard gauge railway project with Djibouti. Addis took up more than $6.62 billion from Beijing for its mega projects, which also included the setting up of manufacturing zones.

As reported by the EastAfrican, China Exim Bank has been the go-to financier for the region’s governments, giving out more than $16.3 billion.

The China Development Bank advanced East African economies more than $6.9 billion, while other Chinese lenders are currently owed $6.1 billion, data shows.

In terms of sector funding, Ethiopia invested the bulk of its funds in the transport sector ($4.37 billion), which was used for both the Addis Ababa light railway project and the Addis-Djibouti 700km railway. This was followed by communications at $3.16 billion and power projects at $2.54 billion.

Its manufacturing sector, which supports its fledging special industrial zones, including the Eastern Industry Zone and Huajian International Shoe City, received $2.02 billion.

“China gave priority to infrastructure and has promoted Africa’s sustainable development through these loans, which have been used for infrastructure construction, energy, and the manufacturing industry,” said Liu Qinghai, a visiting researcher at Cari and head of the Centre for African Economic Studies at the Institute of African Studies at Zhejiang Normal University.

Kenya’s transport sector took in $5.55 billion, largely driven by the new railway line from Mombasa to Naivasha.

Nairobi also took a $597 million loan for its power projects, including the $135 million for the 55 MW solar power plant in Garissa funded by the China Exim Bank.

South Sudan has received $158 million for its transport sector to date and a further $24 million for its energy projects.

Tanzania’s energy sector remains the top financed sector funded by Chinese money, at $1.16 billion.

Dar es Salaam, which has not taken up any Chinese debt under President John Magufuli, has received $552 million for its communications sector.

Uganda, on the other hand, has seen its energy sector receive the highest funding from Beijing, at $1.92 billion, while its transport sector has absorbed $762 million.

Rwanda’s China debt for transport amounts to $151 million.

But the region’s countries seem to have slowed down bingeing on Chinese debt, with only Kenya and Ethiopia going to Beijing for loans.

Ethiopia borrowed $652 million last year, down from $926 million in 2016, while Kenya took $64 million, down from $1.09 billion in 2016.

In 2016, Kigali took $70 million and Kampala $85 million.

China brushes off the criticism of lending huge loans to poor countries.

Last month, China’ s special envoy to Africa, Xu Jinghu, denied claims that Beijing was burdening Africa with debt, noting that China was Africa’s main creditor.

Indeed, data shows that the continent owes more to private lenders than to China.

“It is baseless to shift the blame onto China for these African countries debt problems. Their debt position has ‘been built over time even before we came in.

“We have to look at the fluctuations in the international economic situation vis-a-vis the price of minerals, their key exports. This is where the problem is, and not Chinese loans,” Mr. Xu said.

Thank you for reading our stories!

Besides news and trends, Regionweek is a media created to serve African young professionals with information that they can put to work in their daily life. Would you like making money with a side hustle business that you can build in your spare time? Today you can learn how to earn extra money and grow meaningful businesses. Check ressources on:

1.Business Ideas - 2.Online Business- 3.How to make money

Post Comment