KAMPALA — A Chinese top official, Mr. Yang Jiechi, who is a member of the Political Bureau of the Communist Party of China (CPC) Central Committee, met with President Yoweri Museveni on a series of issues but a source said the major discussion zeroed on Uganda’s swelling debt.
Mr. Yang, also director of the Office of the Foreign Affairs Commission of the CPC Central Committee represented Chinese President, Mr. Xi.
A source familiar with both discussions held at Ministry of Foreign affairs on Sunday, February 21 and Monday 22 at State House said Mr. Jiechi seriously warned Ugandan authorities on the consequences of the debt.
For example, Mr. Jiechi wanted both countries to negotiate for China’s rights to Uganda’s sovereign assets but President Museveni reportedly pleaded with China to
ease the debt pressure, by restructuring Uganda’s loans over a longer time period.
Mr. Jiechi reportedly said he needed to consult before he agreed to Uganda’s requests of restructuring Uganda’s loans over a longer time period.
President Museveni recently said Uganda’s debt was sustainable and maintained the country was not losing any of its assets to creditors.
He had for a very long time publicly downplayed the seriousness of Uganda’s debt noting that: ” As long as I’m still in charge, I don’t see that happen at all”.
The auditor-general, John Muwanga warned in a report released recently that public debt had seriously increased and that it had become a top threat to many of the country’s assets.
The report — without naming China — warned that conditions placed on major loans were a threat to Uganda’s sovereign assets.
As of the end of June 2020, Uganda’s public debt was UGX. 56.5 trillion ($15.33 billion), the Bank of Uganda (BoU) said in a report.
About two thirds of the debt is held by external creditors including China and World Bank, and the public debt is now 40.8% of GDP.
The report attributed the 20.5% rise in debt from June 2019 to new borrowing for “countering the economic distress brought about by the COVID-19 pandemic.”
Uganda’s opposition and the IMF have in recent years expressed unease about the ballooning public debt and potential repayment problems.
Auditor General’s report said that in some loans, Uganda had agreed to waive sovereignty over properties if it defaults on the debt — a possibility that officials including Finance Minister Matia Kasaija and President Museveni both rejected.
“China taking over assets?… unless there is really a catastrophe, and which I don’t see at all, that will make this economy going behind. So, … I’m not worried about China taking assets. They can do it elsewhere, I don’t know. But here, I don’t think it will come,” Mr. Kasaija was quoted as saying before the economy was hit hard by Coronavirus.
Today, China is one of Uganda’s biggest country-lenders, with about $3 billion in development projects through state-owned banks.
China’s Exim Bank has funded about 85 percent of two major Ugandan power projects — Karuma and Isimba dams. It also financed and built Kampala’s $476 million Entebbe Express Highway to the airport, which cuts driving time by more than half.
China’s National Offshore Oil Corporation, France’s Total, and Britain’s Tullow Oil co-own Uganda’s western oil fields, set to be tapped by 2021.
Source say China’s foot in Uganda’s oil could be one way it decides to take back what is owed.
“By having a foot in there they will say fine, we are going to pay you for oil. But instead of giving you $60 a barrel, you owe us. We’ll give you $55. The $5 you are paying the old debt. But we are reaching a level where you don’t see this oil being an answer to the current debt problem,” a top economist said.
Uganda’s worries about China seizing national assets are not the first in Africa.
A leaked December report in Kenya showed China was promised parts of Mombasa Port as collateral for financing a $3 billion railway it built from the port to Nairobi.
Both Chinese and Kenyan officials have denied that the port’s ownership is at risk.
Reports in September that China was taking over Zambia’s state power company over unpaid debt rippled across Africa, despite government denials.
But the fear of a Chinese takeover of a sovereign state’s assets over debt is not completely without merit. Struggling to pay back loans to state-owned Chinese firms, Sri Lanka in 2017 handed over a strategic port.