RWANDA OFF THE CHINESE LOANS HOOK

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  • China Fully Backs Rwanda’s Industrialization and Infrastructure Upgrade Programm.
  • Kenya struggling with public debt With SGR Operating At A Loss.
  • Rwanda’s Economic Track Record  Quite Robust Thanks to Chinese Loans

 

 

China has offered Rwanda a $7.1 million debt remedy or 50 million RMB Yuan on a mortgage used to construct the 6.36-kilometer Masaka-Kabuga road under the Kigali urban upgrading program.

According to a statement issued by Rwanda, the move is part of the Chinese government’s decision to cancel the outstanding interest-free loan in accordance with the agreement on economic and technical cooperation between the two nations. The two countries revel in wholesome bilateral cooperation that is evidenced by means of the huge contribution of the Republic of China in the direction of Rwanda’s improvement aspirations. ‘The settlement we signed today cements this relationship,” Rwanda’s Minister for Finance and economic planning Uzziel Ndagijimana said on Monday after signing the debt cancellation agreement. China was represented by its ambassador to Rwanda Wang Xuekun accompanied by high-ranking dignitaries.

 

 

Rwanda finance minister Rwanda’s finance minister, Dr. Uzziel Ndagijimana signed the debt cancellation agreement

 

Robust Economic Cooperation

 

Dr. Ndagijimana highlighted the sturdy financial cooperation between the 2 nations which has seen Rwanda benefit from China’s help in numerous sectors which include infrastructure, energy, education and health. China says the debt cancellation is part of the economic package deal announced by  President Xi Jinping at the 8th Ministerial conference of the discussion board on China-Africa Cooperation. “China hopes, by providing this monetary aid, to contribute to Rwanda’s all-spherical transformation and recuperation from the malign impact of the Covid-19 pandemic. “In the days to come, China will work with Rwanda for deeper realistic cooperation in diverse fields under the Belt and Road Initiative framework to deliver greater blessings to the two partners,” Wang said in a statement.

Rwanda’s industrialization and infrastructure program has been well received and touted as a role model in the region where projects are synonymous with corruption. A good example is the almost double cost quotation that was adopted by Kenya to build the SGR while Ethiopia did a similar length rail and in fact, went on to procure modern engines for the rail as compared to the Kenyan “dinosaurs” a term used by many to emphasize on the ancient look engines that Kenya acquired for a ridiculous amount.

 

Different Story For Kenya & Tanzania

 

It however is a different story when it comes to Kenya and Tanzania. Kenya defaulted on repayment of the Chinese loans furnished to construct the standard gauge railway (SGR), highlighting the country’s struggles with the mounting public debt.
The Chinese banks fined Kenya Ksh1.312 billion ($10.eight million) in the year ended June for loan defaults,  according to files from the treasury that managed to reach the media.

Kenya tapped over half a trillion shillings from Chinese creditors, led by the Export-Import financial institution of China, to fund the development of the SGR from Mombasa to Naivasha in what amounted to eyebrows being raised over the Naivasha route. Apparently, experts warned that the Naivasha route was not going to be economically beneficial to the country sighting conflict of interest and selfish ambitions from authorities in a country highly ranked in matters of corruption.

Taxpayers were forced to shoulder the weight of the SGR loans because sales generated from the passenger and load offerings at the turn are not sufficient to counter the operation costs, which stood at Ksh18.5 billion ($152.8 million) in the yr ended to June against income of Ksh15 billion ($123.9 million). “This (Ksh1.312 billion/ $10.8 million) relates to the cost of default on interest at one percent of the due amount,” said an official of the treasury backed by disclosure documents witnessed by the press.

SGR posted an operating loss of Ksh3.4 billion ($28 million) and stressed Ksh22.7 billion ($187.6 million) in loan payments within the year to June.
The default came in 12 months whilst Kenya had asked for an extension of the debt compensation moratorium from bilateral lenders, along with China, via another six months to December 2021, saving it from committing billions to the Beijing lenders, but the lenders, especially Exim Bank of China, opposed Kenya’s application for a debt reimbursement holiday in a standoff that delayed disbursements to projects funded by Chinese loans. Kenya’s newly elected government has been busy trying and successfully attracting new lenders in what has puzzled a citizenry that was promised an economy free of ridiculous lending as exhibited by the previous regime.

 

 

Chinese projects in Rwanda China has also heavily funded energy projects in Rwanda. Image KT PRESS

 

 

Tanzania could join Kenya on a list of countries that will be left out of the Chinese debt relief deal at the end of this year by virtue of their lower-middle-income status even as the East African nations grapple with an escalating debt burden. Chinese foreign minister Wang Yi has reiterated that the world’s second-largest economy would forgive 23 matured interest-free loans for 17 undisclosed African nations that are categorized as least evolved international locations (LDC).

Last week Chinese authorities in Nairobi said Kenya, which is struggling with a debt of over Ksh8.6 trillion ($72.26 billion), was left out of the deal as it is classified as lower-middle-income. Tanzania also transitioned from low-earning to lower-center-earning status in July 2020 after experiencing over twenty years of sustained monetary increase. Uganda, Rwanda and Burundi are categorized as LDCs. The situation in Zambia is dire and will require a whole column to highlight the on-goings.

Tanzania’s national poverty rate fell from 34.4 to 26.4 percent between 2007 and 2018 while the extreme poverty rate dropped from 12 to 8 percent, according to the World Bank. It is quite evident that Kenya and indeed most African countries including Rwanda will be for a long time attracted to the magnet of Chinese loans. The question to ask oneself is, how will these loans be serviced if the agreements are signed in secrecy, especially in countries with a highly rated corruption card?

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