Debt by African countries to China growing
China is becoming Africa’s main lender. It gets concession in natural resources but is less interested in how the money it lends is used. Another debt crisis might develop as some African countries complain about a Chinese economic invasion.
Beijing (AsiaNews/Agencies) – China’s action as an alternative lender is creating a new wave of hidden debt in Africa as it backs its companies’ expansion overseas with increasingly aggressive lending, this according to the International Monetary Fund. But whilst some African nations bristle at China’s economic invasion, others criticise the West’s wrong approach.
Adnan Mazarei, a director at the Fund, said action was needed “to avoid another round of debt accumulation” as emerging lenders such as China became an important source of funds.
A report prepared by the IMF and World Bank shows China is the largest of six new creditor nations. The others are Kuwait, Brazil, India, South Korea and Saudi Arabia. It said lending by China had risen to US$ 5 billion in 2004. In exchange China gets access to energy supplies and raw materials.
China has committed .1 billion this year to Nigeria, Angola and Mozambique, according to World Bank figures.
Nigeria this year agreed to provide a drilling license to Chinese companies in exchange for a US$ 4 billion commitment to improve infrastructure, including a 1,800 kilometre railway.
China gets 25 per cent of its oil from Angola and Sudan, which is boycotted by other states for the genocide in Darfur.
World Bank President Paul Wolfowitz said that his institution demands economic reforms and tough financial requirements to make loans to benefit the population rather than small elites. China is instead bucking the trend and is not interested in these countries’ financial stability. In doing so it is helping local governments avoid pressure to crack down economic mismanagement, clean up corruption and reduce debt.
Chinese loans raise the prospect of a renewed debt crisis in Africa, just a year after the world's rich nations agreed to forgive as much as US billion of debt.
James Adams, the World Bank’s vice-president for East Asia and the Pacific, said in Beijing the bank had proposed to China to jointly finance projects, but that China had insisted it would not attach detailed conditions to its loans to governments in Africa.
Philippe Maystadt, president of the European Investment Bank, has said the EIB and other multilateral banks were losing projects in Asia and Africa to Chinese banks because they “don’t bother about social or human rights conditions”.
Chen Yuan, governor of the China Development Bank (CDB), the world’s largest development institution by assets, said last week the bank’s lending abroad would rise “very fast” as it backed the overseas push of China’s state-owned energy and mineral companies into Africa.
In some African countries some voices are already criticising Chinese practices. “There is a risk that some governments in Africa may use Chinese money in the wrong way to avoid pressure from the West for good government,” said Papa Kwesi Nduom, who heads the Ministry of Public Sector Reform in Ghana, which is seeking a .2 billion loan from China for a hydro-electric dam and rural electrification.
Meanwhile in South Africa merchants are complaining that the invasion of Chinese products is killing the local economy. In Zambia, where miners are protesting publicly against poor working conditions, a Chinese guard shot three miners.
But some African nations complain instead of Western interference.
“The fact that a country gives you aid makes them think they have a license to tell you how to run your affairs,” Robert Kabushenga, a spokesman for Uganda's government. “These conditions are probably well intentioned, but they are humiliating.”
Chinese officials have also responded to criticism saying that China has forgiven part of the debt of African countries and that it helps them by building roads, railways, hospitals and schools.
Other experts point out however that the work is generally done by Chinese firms and that the amount of money Africa owes Chinas keeps on piling up and that it has to continue to secure loans against concessions.
China is the world's biggest consumer of zinc, nickel and copper and the second-largest user of crude. (PB)