China and Rwanda Sign $60million Grant, Agree 6million $6 million Debt Cancellation.

By Lavie Mutanganshuro, Kigali.

The Government of Rwanda and the People’s Republic of China on February 19 signed an economic and technical cooperation agreement for a grant worth RMB Yuan 400 million (approximately U$ 60 million).

At the same ceremony, both countries signed a debt cancellation agreement worth RMB Yuan 40 million-an equivalent of US$ 6 million.

According to Uzziel Ndagijimana, Rwanda’s Minister of Finance and Economic Planning, both agreements will help the country to recover from economic impacts brought by COVID-19.

“We appreciate this support by the Government of the People’s Republic of China during these challenging times caused by the COVID-19 pandemic. This debt cancellation will free some resources that were otherwise going to be used for debt payment,” he said.

He added: “The grant of RMB Yuan 400 Million is significant and will be used for a priority project to be agreed upon. I take this opportunity to thank the People’s Republic of China for the continued support and cooperation in major sectors of our development.”

In his remarks, RAO Hongwei, Ambassador of the People’s Republic of China to Rwanda, noted that the new deal cements the already existing good relationship between China and Rwanda.

“Today’s signing of the two agreements also fully demonstrates China’s profound friendship with and strong support to Rwanda,” he said.

China hopes, by extending the new financial support, to make contribution to Rwanda’s transformation and recovery from the malign impact of the COVID-19 pandemic.”

RAO Hongwei, Ambassador of the People’s Republic of China to Rwanda and Rwanda’s Finance Minister Uzziel Ndagijimana signing agreement in Kigali. Courtesy Photo

50 years of cooperation

The year 2021 marks the 50th anniversary of the establishment of diplomatic relations between China and Rwanda. The main areas of cooperation between both countries include transport, agriculture, health, education, and energy.

According to Ambassador Hongwei, the cooperation has been deepening, thanks to a historic visit by China’s President Xi Jinping to Rwanda in 2018 among other developments.

The visit that aimed at further strengthening diplomatic ties and cooperation between the two countries followed President Paul Kagame’s visit to China in March 2017.

“Since Chinese President XI Jinping’s historic visit to Rwanda in 2018, the bilateral relationship between Rwanda and China has reached a record high and the comprehensive cooperation between the two countries,” the Ambassador noted.

“In these times of major new opportunities and challenges, we are ready to work with Rwandan friends to forge new opportunities out of crises, make new advances amid changes and build an even more glorious tomorrow for China-Rwanda relations,” he added.

While in the country, President Jinping witnessed the signing of 15 bilateral pacts between the two nations, including visa exemption for diplomatic and service passport holders, culture and scientific operations.

Other agreements signed involve strengthening cooperation in investment in e-commerce, cooperation in civil air transport, law enforcement cooperation, and human resource development cooperation.

Following the visit, the two countries went further to collaborate in exchange of geology surveys, expansion of Masaka hospital, signed a concessional loan to construct 66 km road in Southern Province of Rwanda. Once completed, the road will have cost Rwf70 billion which is a loan from Exim- Import Bank from China.

China is one of Rwanda’s biggest sources of foreign direct investments with most of them in the manufacturing and real estate sectors.


Seven Years of China’s Belt and Road Initiative: How are Developing Countries Benefiting?

By Ssemanda Allawi.

In 2013 – seven years ago, Chinese president Xi Jinping gave a set of speeches where he announced the proposal of the now famous Belt Road Initiative (BRI). Xi delivered the first speech about BRI during his visit in Kazakhstan, elaborating his desire and vision of restoring the ancient silk road which offered routes from Peoples Republic of China, through Central Asia to the far Europe. In October, 2013 during his speech to Indonesian parliament, president Xi announced his maritime silk road concept to Indonesians to facilitate trade and ease movement of goods and services.

In the seven years of the project’s implementation, BRI has registered considerable achievements seeing over 29 International Organisations and over 71 countries sign or joining it. This means that more than a third of global GDP and more than two thirds of world’s population are part of the project!  This means that upon completion, the project will make the world’s largest market easy to access and traverse on both road and sea which are key in transportation and mobility of goods and services.

However, this is not without critics especially from some parts of western world with the U.S leading critics of the project with claims such as lack of transparency from Chinese authorities especially its financing while others branding the project is part of what they call China’s debt diplomacy.

However, research indicates that claims of lack of data on funding of the projects are largely wrong as a number of studies and research work  have given a clear view  of funding of this project.

Critics of China and BRI project in particular have often claimed the project is too expensive and will see developing countries fall in what they call China’s “debt diplomacy” with some western capitals branding the project Beijing’s debt trap. Many of critics have always cited Sri Lanka’s Hambantota which was leased to a Chinese firm for 99 years to help repay the country’s debts. The claims that Hambantota port was seized by China are also ambiguous considering the current state of the port if compared to how its state before the Chinese firm invested in it.

Washington has also been very critical of BRI project and generally China’s funding of infrastructure development in different parts of the world claiming that many of Beijing’s clients are  pariah states

However, some of these claims seem to be political with Washington screed of China’s growing relations with the rest of the world which they see as one way of antagonising U.S’ strategic interests. A case in point is citing Beijing’s growing relations with African state of Djibouti. In 2018, U.S’ top military commander in Africa, Marine General Thomas Waldhauser told U.S’ House Armed Services Committee that China’s state-owned China Merchants Port Holdings owning shares in Djibouti’s meant that U.S military could face “significant” consequences. Djibouti is one of many countries China considers part of its Belt Road Initiative.

In regard to Beijing’s infrastructure assistance going to undemocratic states, this is largely wrong. Most of Beijing’s borrowers are democracies with countries such as South Africa, Tanzania, Brazil, Kenya, and Tanzania. Other democratic countries that that have benefited from China’s infrastructure loans include United Kingdom (UK). China is a major investor in UK’s Hinkley Point Nuclear power plant in Somerset.

Therefore, despite critics of BRI, it can be argued that the project so far is a success. Indeed, in 2019, a study by World Bank entitled; “Belt and Road Economics: Opportunities and Risks of Transport Corridors” analysed transportation projects along the BRI routes and concluded that benefits to recipient countries and the entire world would benefit from the project. In Kenya for example, as a result of Belt Road Initiative project, the country built a 470 km railway line from Kenya’s capital, Nairobi to the coastal city of Mombasa which shortened travel time from 10 hours to five, created over 46,000 jobs and helped the country’s GDP by 1.5%.

Despite the study reporting more cases of policy impediments than infrastructure impediments – such as customs delays, bureaucracy, red tape, imports tariffs and corruption which increase trade costs, the study is a proof that BRI will play a significant role toward both social and economic development of the world.

From the above and findings of this study, it is evident that improving investment climate is a key complementary when it comes to supporting and investing in infrastructure sector. This can be realised through deep trade agreements such as the proposed Africa Continental Free Trade (AfCFTA). On Global scale, agreements such as BRI, AfCFTA and the recently reached trade liberalisation agreement between China and ASEAN, Australia, South Korea, New Zealand and Japan can help to eliminate tariffs which sometimes are barriers of trade.

Therefore, critics of infrastructure development should not look at infrastructural development in lenses of competition but rather putting in place facilities to aid trade. In particular, those criticising BRI branding the project a debt trap or debt diplomacy should reconsider their exaggerated claims. For example, countries that do borrow funds from China have also on many occasions borrowed from the so-called traditional donors or World Bank, IMF as well as other private bond holders. This means these countries diversify their sources of finances and thinking that they are beholden to China is ignoring key and glaring facts.

However, whereas it is very hard to present facts of the so-called debt diplomacy, there are genuine concerns when it comes to debt sustainability especially to African countries. However, these concerns should not only be tied to borrowing from China but rather all relevant lenders. This is because, unlike domestic debt, foreign debt has to be serviced using exports and this way, there are clear limits that point at how much borrowing developing or poor countries may take and continue to thrive.

In addition, the impact of Covid-19 pandemic on global economies feared to cause recession has should serve as a warning that many developing countries may find it hard to sustain their debts. Almost all countries that were projected to continue with a positive economic growth curve before covid-19 now are IMF analysis shows these countries projections were negatively impacted by covid-19 which has caused negative impact on countries exports and affected their GDP growth and hence, raising questions if these countries can sustain their debts. Indeed, many of China’s clients in Africa are in debt distress.

Early this year, China joined G20 in offering developing countries debt relief as a way of helping countries affected by Covid-19 pandemic recover. Among countries to benefit from this plan include 40 from sub-Saharan region. Despite this effort, debt moratorium alone may not be a magic bullet for Africa and other developing countries. Debt restructuring or write-downs. The challenge is that such arrangements often are done through the Paris Club of which China is not a member. However, if China wants to write-down debts on some African countries and developing countries in general, it can since it has done it before

On the other hand, the US announced a new development finance institution, also known as U.S. Development Finance Corporation (USDFC) to compete with China in offering infrastructure funding to development countries.  Though this is a positive development, this initiate alone will not bring swiping changes. Most of developing countries prefer to use Chinese funding when it comes to infrastructure funding. Though they may look generous, traditional funders and their multinational banks prefer to fund sectors such as administration, social services and the so-called democracy promotion instead of funding the much-needed infrastructure programs. For example, at first 70% of World Bank’s funding went to infrastructure but has been reducing to recently 30% despite huge funding gaps in infrastructure sectors in developing countries.

It is important to note that developing countries are still faced with shortage of funding especially in infrastructure projects which are key for development. A study by World Bank and McKinsey Global Institute found that funding for infrastructure projects such as transport and electricity is lacking, noting that to ensure a socially inclusive development by 2030, there is need to spend more than $3.3 trillions annually of which 60% of this must go to developing countries in Africa. African Development Bank (ADB) on the other hand estimates that to meet demands of their growing population, replace aging infrastructure, African countries must spend between $130-$170 billion annually on infrastructure. Also, a 2017 study by World Bank “Why We Ned to Close the Infrastructure Gap in Sub-Saharan Africa” suggested that if these countries reduce funding gaps for infrastructure, the region’s GDP per capital will grow by 1.7% and hence. All the above shows that any infrastructure assistance to developing countries should not be underestimated and hence, the view that BRI project is a positive initiate for developing countries world over.

In conclusion therefore, as studies have indicated, BRI project has more benefits if compared with challenges it may bring. Instead of critiquing the project largely to Geo and Global politics, China’s critics especially the U.S should back the project and where possible embrace and support new trade agreements such as AfCFTA to improve trade and investment climate in developing countries than only negatively criticising funders that fund developing countries projects. Also, the U.S may champion calls to reform the The Bretton Woods institutions and offer attractive alternative funding to developing countries, reduce their anti-China rhetoric and instead participate with China whenever there are efforts to offer debt relief.

Covid-19 Challenges: Will China’s Debt Relief to Africa Work?

By Allawi Ssemanda

As a result of restless calls for debt relief for African countries due to the inevitable economic meltdown brought about by Covid-19, China’s Debt relief plan for Africa is steadily emerging. It is believed that China is Africa’s Largest single – country creditor and therefore had to lead efforts in discussing debt relief for the continent.

Whereas key questions regarding implementation plans remain unclear, arguably, issues raised bellow present a fair overview of the Chinese plan.

Beijing’s Official Frameworks for Debt Relief.

Recently, officials in Chinese government have made two clear commitment regarding the debt relief debate. The first commitment came during the Group of 20 (G-20) where debt service suspension initiative for the heavily indebted or poorest countries was reached after discussion of finance ministers and Central bank governors. It was after this agreement that China’s Foreign Affairs Ministry observed how G-20 including China agreed to suspend repayment of both principal and interest effective May 1st 2020 until the end of the year, 2020. Under this arrangement, debt service payments owed by the 76 International Development Association (IDA) countries, plus Angola including 40 Sub-Saharan African Countries is suspended.

Beijing’s second commitment came from president Xi Jinping during a virtual event on 18th May 2020 at opening of the 73rd World Health Assembly where he promised $2 billion to help developing countries affected by Covid-19. During the event, president Xi committed that; “China will provide $2 billion over two years to help with Covid-19 response and with the economic and development in affected countries, especially developing countries.

A closer analysis of diction in Chinese version is categorical that such donation will be made from the category of International Assistance. Put differently, it will come from China’s Foreign Aid Budget.

It can be argued that because Beijing designated $2 billion to help developing countries respond to Covid-19 and address its effects on social and economic development in affected countries, China leaves an open door for such allocation to be earmarked toward debt relief. With China’s approach towards bilateral economic and social development, conclusion can be made that such assistance will take bilateral approach. This was evident as was affirmed by China’s Foreign Minister, Wang Yi, during a press conference on May 24th stressing that China will ensure debt relief for African countries in two ways: bilateral approach and the G-20 debt payment suspension Initiative. This was re-emphasized as on June 7th during the launching of the white paper entitled “Fighting Covid-19: China’s Action” with China’s Foreign Ministry emphasizing

that the $2 billion donation earmarked by China to support African countries will be dispensed through bilateral and multilateral means and will help address challenges such as poverty alleviation, public health and supporting economic recovery.


Does G-20 Initiative Cover Concessional Loans?


Discussing China’s debt relief for African countries without answering the question of concession loans leaves the discussion incomplete. Despite taking a lion’s share of China’s lending to African countries in the last two decades, as a result of their commercial nature commercial loans are not covered under this initiative.

A review of China-Africa Cooperation (FOCAC) financial commitments confirms this. According to Beijing’s 2006 FOCAC pledges, 50% of this funding is concessional in nature with concessional loans at $3 billion while concessional buyer’s credit was $2 billion. The 2009 FACOC pledges the $10 billion commitment China offered was concessional loan. This was actually 10 times bigger than special loans extended to Africa’s small and mid-sized enterprises. For 2012 FACOC financial pledges concessional loans totalled $20 billion which more than 50%. In 2015 concessional loans and exports buyers’ credit was $35 billion making it to about 60% of the total $60 billion committed. In 2018,there was a great shift with concessional loans dropping. Grants, zero interest loans and concessional loans all added to 25% of the $60 China committed to African countries.

With that background, the G-20 agreement as it is now is arguably inform of a pause or standstill not a cancellation of debts. However, this standstill is meant to help African countries time to be able to stand economically and meet their obligations. Further, observers agree that this kind of standstill will apply to concessional loans. Important to note is that the G-20 agreement again, to a pause or standstill, not a cancellation – as it is as of now is applicable for eight months starting from 1st May, 2020 till 31st December, 2020.

It can be argued that with the already devastating economic and health impact Covid-19 pandemic has caused, African countries still need a long debt relief beyond the one negotiated by G-20. This to happen means new negotiations which must look at factors such as resumption of African economies and addressing continued health and economic impact of this pandemic coupled with matching relief efforts by both multilateral creditors and private creditors so as to realise a holistic solution. In other words, the G-20 debt relief frame work which is equivalent to 8 Months suspension of debt repayment period is not long enough. Put differently, broader, bigger and long-term debt relief is not yet on table.

What does President Xi’s Speech mean for African Countries?

On 17th June, 2020, Africa and China held a much-needed China-Africa Extraordinary Summit. The summit was chaired by China and Senegal (in its capacity as co-host of the Forum on China-Africa Co-operation – FOCA), and South Africa (as the current chair of the African Union). Dr Tedros Adhanom Ghebreyesus, the director-general of the World Health Organization (WHO) also attended.

In his address, president Xi pledged that China will stand shoulder to shoulder with African countries stressing that; “Let me reaffirm China’s commitment to its longstanding friendship with Africa. No matter how the international landscape may evolve, China shall never waver in its determination to pursue greater solidarity and cooperation with Africa.” 

During this summit, Chinese President Xi Jinping promised that China will continue helping African countries with equipments needed to contain the spread of Covid-19. Another great gesture was President Xi’s promise which re-emphasized the point that China will waive some debt from African countries due this year, and also restructure time frames for repayment from some countries. Such promises are not new, indeed, in 2015, 2018 and 2019, China wrote-off debts on a number of African countries

China’s promise to fund Africa’s Centre for Disease Control (CDC) in Ethiopia’s capital Addis Ababa as was announced by African Union Commission in many ways shades light of how Beijing is committed to strengthening China – Africa relationship.

Despite a few unresolved questions on the project; such as time frame of proposed CDC and the site, China’s pronouncement that Beijing is ready to fund the centre is enough to further describe Sino-Africa Relations as one of mutual benefit, respect and presents China as a true and reliable ally.

There is no doubt that the decision by Washington to withdraw financial support for World Health Organization at this critical time makes their work difficult, leaving negative consequences especially on regions like Africa which are arguably not fully self-reliant to singly deal with Covid-19.


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