African countries piling up debt they won’t be able to pay back, including to China, should not expect to be bailed out by western-sponsored debt relief, the United States’ top Africa diplomat has warned.
“We went through, just in the last 20 years, this big debt forgiveness for a lot of African countries,” said Tibor Nagy, the U.S. Assistant Secretary of State for Africa for African Affairs, at a press conference late Sunday in Pretoria, South Africa, according to Reuters news agency.
Rwanda and many of the African countries saw all their foreign debt cancelled completely under the Heavily Indebted Poor Countries (HIPC) Initiative in 1996. Rwanda’s was cleared in 2005.
But a few years later, the continent is facing another potential debt crisis, with around 40 percent of low-income countries in the region now in debt distress or at high risk of it.
“Now all of a sudden are we going to go through another cycle of that? … I certainly would not be sympathetic, and I don’t think my administration would be sympathetic to that kind of situation,” said the US official.
It is not the first time Nagy is going on the offensive against China. While in Rwanda on March 11, he accused China and Russia of luring Africa with debt and promoting corruption.
He said: “Investors seek a level playing field, predictable policies, and a despute resolution process that follows the rule of law – not who pays the highest bribe…Sadly, as we all know, some other countries investing in Africa have not been as interested in promoting a level playing field and will not speak out about corruption.”.
Rwanda on its part has accumulated a debt of $3.5billion, more than 40% of the country’s GDP.
Only $289 million of this debt is owed to China, but Rwanda has attracted huge amounts of grants from Beijing.
The situation is worse with Rwanda’s regional neighbours. Data from the China-Africa Research Initiative (Cari) at John Hopkins University, released in October last year 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.
Last week, while accepting a $42.8m grant for a new road network in Kigali, alongside the Chinese envoy, a government minister defended Chinese loans.
“We are not afraid of grants and loans that we are given by China, because when you see our rate of debts you find it is still very low,” said Dr Claudine Uwera, the State Minister in Charge of Economic Planning in the Ministry of Finance and Economic Planning.
For the Chinese envoy Rao Hongwei, the grant “won’t be the only good news for us. It’s also today that the RwandAir opens the direct flight from Kigali to Guangzou. In Chinese we call it ‘Double Happiness’”.
Last week, The Chronicles reported of the worrying situation with the Republic of Congo where the government has sent up an “Indebtedness” Commission.
The oil rich nation has foreign debt of $9.1billion, according to the International Monetary Fund. About $2.4billion is owed to China alone.
As of October 2018, the debt was actually 110% of the country’s GDP.
From 2000 to 2016, China loaned around $125 billion to the continent, according to data from the CARI from the John Hopkins University.
And a number of African countries form part of China’s $126 billion Belt and Road Initiative to link China by sea and land through an infrastructure network with southeast and central Asia, the Middle East, Europe and Africa.
“All of these countries are sovereign states, so it’s for them to decide who they want to trade with,” Nagy said. “We feel we have an obligation to point out to them when we believe they are getting into severe economic difficulties.”