Most countries borrow locally and internationally to finance grand projects, and Africa has not been left behind in this.
However, concerns have been raised over Africa’s increasing foreign debt.
Just recently, the U.S. Overseas Private Investment Corporation (OPIC) expressed concerns that China is saddling African countries with debts through infrastructure projects that are not economically feasible.
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“Just look at any project in these countries and they’re overbuilding the size. We try to have countries realise that they’re indebting themselves to the Chinese,” OPIC CEO Ray Washburne said in an interview.
The message was the same when former U.S secretary of State Rex Tillerson was on his African tour. He had warned African countries about the amount of debt they are accruing in China.
A few months ago, the International Monetary Fund said that the debt African countries are collecting are higher even with the growing economies. It highlighted the slow growth of Africa’s biggest economies, South Africa and Nigeria and added that Chad, Eritrea, Mozambique, Congo Republic, South Sudan and Zimbabwe are already in economic distress.
On the continent, citizens have expressed concerns over their government fiscal policies. Already Kenya’s foreign debt to China is about 70 per cent, even when the Standard Guage Railway, which was constructed with China’s loan made a loss in its first year.
However, the interesting aspect of this debt situation is that America and China, now at loggerheads, has put Africa on focus.
OPIC is now trying to offer an alternative through an African-focused initiative that spends $1billion. America is also advancing a new law called the BUILD Act that might help private investments by U.S. organisations in Africa.
According to Washburn, “Instead of giving them a fish, we want to teach them how to fish. They’ll have to stand on their own two feet. So we’re not in making loans or doing projects that don’t make economic sense.”
Even with such a solution, the situation does not change much for Africa. For the longest time, Africa has been receiving debt from the West. Therefore it just seems like America’s concern is coming in a little bit too late and all for the wrong reasons.
They are more concerned that the debt is owed to China than that Africa is in debt.
Nevertheless, there is a need for African countries to check their debt and implement fiscal policies that would improve the African economy rather than cripple it. Africans want a more balanced bilateral agreement, where job creation and economic sustainability is achieved.