For the renovation of an airport Uganda is the latest victim of the “debt trap” of the Xi Jinping regime

The new 51-kilometer four-lane highway built in China connecting the Ugandan capital Kampala with Entebbe International Airport (Photo: REUTERS / James Akena) (James Akena /)

Uganda appears to be the latest victim of the Chinese “debt trap”, the strategy of the Xi Jinping regime to keep the resources of developing countries by granting loans for the construction of infrastructures that become impossible to pay.

The alarms sounded at the end of November, when it transpired that Uganda, an impoverished East African country, could hand over Entebbe International Airport in case it defaults on a $ 200 million loan from Beijing in 2015 to expand and improve the facilities.

The diary reveal Daily Monitor caused a stir in Uganda, where images of the Chinese flag waving over the airport and others showing a banner that read “Welcome to China‘s Entebbe International Airport” which were widely shared on social media.

While both China and the Ugandan civil aviation authority denied the possibility of the airport ending up under Chinese control, the disclosure once again brought the impact of the investment and loan program under scrutiny with which China seeks to build a vast network of transport, energy and telecommunications infrastructures known as the Belt and Road Initiative.

In recent years, these investments have been particularly aggressive in Africa and neighboring Asian countries.

Cranes operate at a construction site in Sihanoukville, Cambodia (Photo: Bloomberg)
Cranes operate at a construction site in Sihanoukville, Cambodia (Photo: Bloomberg) (Brent Lewin /)

In Kenya Y Ethiopia, politicians, public watchdogs and the media are questioning the timeliness of expensive railways built by Beijing. A change of government in Zambia this year revealed previously undisclosed debts to China, and the new leadership turned to the International Monetary Fund for financial support.

Other A paradigmatic case was the transfer of the main port of Sri Lanka to a Chinese government company in 2016, after the country was unable to repay the loans to finance the project. Emblematic in Latin America is the of the Coca Codo Sinclair dam in Ecuador.

A similar, albeit more complex, scenario is unfolding in Uganda.

Work on the expansion of Entebbe Airport by China Communications Construction Company, state-owned, started in march 2016.

According to the plan, reviewed by the Wall street journal, the Export-Import Bank of China it would lend money to Uganda, which would pay the Chinese company to build new passenger and cargo complexes, as well as fix two runways and associated taxiways. The renovations are approximately three-quarters complete and connect the airport with a separate highway, financed and built by China, towards the Ugandan capital, Kampala. The project is expected to be completed by the end of 2022.

In the loan proposal, the project would be divided into two phases with a loan of USD 200 million and USD 125 million at an interest rate of 2% and with a 27-year payback period, for a total disbursement of USD 417.91 million.

A reference in the 17-page proposal to a custody agreement received little public attention at the time Uganda agreed to the deal.. The loan agreement itself is not publicly available.

Ugandan President Yoweri Museveni during the swearing-in of his sixth term in May 2021 (Reuters)
Ugandan President Yoweri Museveni during the swearing-in of his sixth term in May 2021 (Reuters) (PRESIDENTIAL PRESS SERVICE /)

In October this year, a parliamentary panel led by opposition politicians revealed that the agreement provided that all income and expenses incurred by the airport operator, the Uganda Civil Aviation Authority, would pass through accounts controlled by the Export-Import Bank at a Kampala branch of Africa’s South Standard Bank Group Ltd., partly controlled by Beijing’s largest bank, the Industrial and Commercial Bank of China (ICBC).

That is to say, The deal gave the Chinese government-controlled bank the financial oversight power normally reserved for the country’s treasury and parliament. and, at the same time, the power to influence which creditors receive the payment first.

The agreement also limits the Ugandan government’s ability to leverage revenue generated by a strategic airport for central Africa and with rapidly growing traffic.

The Export-Import Bank now he has to approve any budget expenditure “ from Uganda’s aviation authority, said Joel Ssenyonyi, a lawmaker who heads the parliamentary panel that revealed the details of the loan. “It’s scary”.

Amid the uproar, and while local media denounced the risk of the airport falling under Chinese control, the parliament summoned the Ugandan Finance Minister, Matia Kasaija.

The official said that it had been a mistake to accept those terms, but that Chinese negotiators had presented a “take it or leave it” agreement. He said that the loan will be repaid and that there is no possibility of the airport falling into Chinese hands. The first loan payment is due in April.

Officials of Uganda say Beijing has rejected their efforts to secure more favorable terms for Entebbe airport debt, in particular to remove what they describe as “toxic” contract clauses related to escrow and a waiver of sovereign immunity.

  Xi Jinping during his speech at the triennial Conference of the China-Africa Cooperation Forum (REUTERS / Cooper Inveen)
Xi Jinping during his speech at the triennial Conference of the China-Africa Cooperation Forum (REUTERS / Cooper Inveen) (COOPER INVEEN /)

The case put pressure on the Ugandan president, Yoweri Museveni, who had already been criticized for being too close to Chinese leaders and taking too many loans.

Uganda has at least four other loans from the Export-Import Bank for projects that have credit conditions similar to those of the airport, according to the opposition. The president’s office says Museveni himself has tried to renegotiate problematic loan terms.

Increasing scrutiny over Chinese loans made the Chinese loan itself Xi Jinping suspend debt obligations in both 2020 and 2021 for lower-income borrowers hit by COVID-19.

The president also assured last month that the Chinese presence in Africa is an “association of equals.” during a virtual speech to regional leaders gathered in Senegal for a Triennial Conference of the China-Africa Cooperation Forum. Analysts said Xi appeared to downplay regional loans and infrastructure construction, instead highlighting commercial projects and cooperation in fighting the pandemic.

In this context, some Western governments and academics believe that China’s loans are a political risk Y financial growing not only for the countries that receive them but also for Beijing.

According to a report by Yun Sun, a nonresident fellow of the Brookings Institution, China could be forced to cut loans because “It is financially unviable and politically problematic.”

Keep reading:

The Sri Lanka case, key to understanding why developed countries do not trust Chinese credits

A tottering dam and an unpayable debt for Ecuador: Xi Jinping’s business in Latin America

Coca Codo Sinclair, the mega dam that China built in Ecuador, continues to generate millions of dollars in losses