Debt diplomacy threat to sovereignty

Musa Radoli @PeopleDailyKe

For several years now, the international community has been accusing the Chinese government of practising what is termed as diplomacy of debt traps especially with developing countries in Africa.

These accusations have been voiced by Western countries, especially the United States, which has openly been uncomfortable with China’s spreading economic influence globally, thanks to the latter’s  ability to dish out huge loans to finance mega development projects.

While the loans have been ploughed into the projects, especially infrastructure, some of the beneficiary countries could either fail to honour repayment schedules to Beijing or default—  and the economic consequences could be dire for the borrowers.


The Chinese government is on record to have repossessed some of these projects to repay itself hence threatening the economic sovereignty of these nations, depending on the nature of the projects in question.

Most of the loans from the Chinese government are channelled key financial institutions, especially the Exim Bank and Bank of China, which has its regional headquarters in Nairobi.

The  warning on the huge loans trap was on several occasions raised by former US Secretary of State Rex Tillerson, who said the increased Chinese facility to African countries was creating a dependency syndrome.

When he visited  Kenya he was emphatic that loans encourage dependence using opaque contracts, predatory loan practices and corrupt deals that mire nations in debt and undercut their sovereignty, denying them their long-term self-sustaining growth.

Rising influence

While it is an open secret that US is uncomfortable with a rising China’s influence especially in world trade, it has emerged that the latest concerns from indebted countries vindicates Tillerson’s concerns.

Angola is one such country which, according to the Oil Producing and Exporting Countries records, indicate that, approximately half of its 1.7 million barrels a day of oil goes to China to repay the debts that country owes Beijing.

It is through that the country’s The Belt and Road Initiative (BRI) loans from that country are dispensed to interested developing countries to finance their respective development projects as national initiatives.

Despite the concerns raised, yet with the BRI diplomacy, more loans are dangled to the developing states which are very hungry to access huge amounts of money to finance their pet development projects.

Loan regime

According to the Chinese embassy in Nairobi, the BRI, mooted in 2013 by the Chinese government, is an elaborate loan regime that China is rolling out to poor countries, especially in Asia and Africa.

The epic project targets more than 65 countries for land and sea infrastructure, a powerful diplomatic statement that is sending tremors across the globe. China is projecting the initiative to cost $1 trillion (Sh100 trillion) — and many developing countries are scrambling for the loans that will ultimately, if the BRI succeeds, position China as a superpower.

But observers of international relations have dabbed BRI an instrument of what is now called “Debt Trap Diplomacy”.

Indeed, China is a calculating financier because most of its loans are collateralised against strategic assets like minerals or seaports.

Seize assets

When  countries default on the loans, it affords China the liberty to seize assets and even territory in lieu of the repayments with the best example being quoted as the case of Sri Lanka’s Hambantota multi-billion dollar project.

Struggling to pay its debt to Chinese firms, Sri Lanka formally handed over the strategic port of Hambantota to the Chinese government last year to manage the port and pocket the revenue to recover the loans it advanced to finance the project.

Recent unconfirmed reports from Zambia indicated that the Chinese government is planning to take over that country’s national power company Zesco and the national broadcasting corporation ZNBC over unpaid loans.

Even as these developments were emerging, the 6th Africa China Summit had been concluded in Beijing officially opened by the Chinese President Xi Jinpin and attended by heads of state from Africa accompanied by large delegations representing private sectors in these countries.

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