Tag Archives: China Development Bank

How to Make Friends: Load Them Up with Debt

“It’s no secret…China is by far the largest bilateral creditor to African governments,” said Mike Pompeo, America’s secretary of state, in June 2020, blaming it for creating an unsustainable debt burden. The World Bank disclosed ib July 2020, how much governments owe to China (and other lenders). The World Bank report revealed that developing countries owed $104 billion to China at the end of 2018. The total includes soft loans from China’s government, semi-soft loans from “policy banks”, such as China Development Bank, and profit-seeking loans from state-owned commercial lenders. The same countries owed $106bn to the World Bank and $60bn to bondholders…

The new figures confirm Mr Pompeo’s observation that China is by far the biggest bilateral creditor to Africa, and in many poor countries elsewhere. It accounts for about 20% of the total foreign debt owed by the 73 governments eligible for the G-20 moratorium on debt payments due to the COVID-19 pandemic (the Debt Service Suspension Initiative (DSSI)). That is more than all of the Paris Club lenders, including America, Britain and Japan, combined.

Excerpts from Public Finance: The Debt Toll, Economist, July 4, 2020

Blackstone, China, Secrecy: Guyana

The government of Guyana wants to move forward with an $840m project at Amaila Falls, deep in the forested interior. At full capacity of 165MW, it could supply more power than Guyana’s present needs.  The lead developer is Sithe Global, part of the Blackstone Group. Sithe wants a guaranteed 19% return on its equity stake, and plans to start construction this year. China Railway First Group signed an engineering contract in September. The China Development Bank will lend most of the money. The Inter-American Development Bank has been asked to chip in $175m; the World Bank was initially involved, but has pulled out.

Amaila’s supporters point out that it will flood less than 55 square km (21 square miles). No villages will be displaced and little wildlife will be disturbed. Guyana would no longer rely on fossil fuels for electricity. After two decades, ownership would pass to the government, construction costs paid off.

Opponents worry that clean electricity will not come cheap. Guyana Power and Light (GPL), the state-owned electricity company, will pay about $100m a year to the Amaila consortium. Electricity bills are unlikely to fall (three people were killed last year in protests over electricity charges). And Amaila’s power may not be reliable. The El Niño weather pattern can bring a year-long drought. In normal years, the plant will run below capacity between October and April. GPL will have to pay for backup thermal power. The IMF has urged “careful consideration of the [financial] risks”.

Plans to build Amaila date from 1997, though Sithe only got involved in 2009. The estimated cost has risen steadily. An access road is unfinished. There is as yet no economic feasibility study for the project; when completed, the study will remain confidential, as is GPL’s outline power-purchase agreement. Opposition parties complain that the government is being “secretive” about Amaila. On April 24th they blocked funds for a government equity-stake in the project. If Amaila is as beneficial as its backers claim, an open debate might generate broader support for the project, and cut its $56m bill for political risk insurance.

Hydropower in Guyana: Shrouded in secrecy, Economist, May, 4, 2013, at 39