China writes off Cameroon debt
February 6, 2019 | Expert Insights
China has written off $78 million from Cameroon’s debt after it failed to repay part of the debt in 2018. The relief comes as a measure to ease economic hardship in central African nation.
From 2000 to 2017, the Chinese government, banks and contractors extended US $143 billion in loans to African governments and their state-owned enterprises (SOEs). Chinese financial support comes in various forms. Some loans qualify as "official development aid." But others are export credits, suppliers' credits, or commercial, not concessional in nature. In 2016 there was a 106% increase in the number of Chinese projects in Africa. Chinese companies have invested in 293 projects with a total outlay of US$66.4bn.
China established diplomatic relations with Cameroon in 1971. Their economic partnership grew after Nicolas Sarkozy became president of France in 2007. China has been granting Cameroon debt relief - in 2001, it cancelled $34 million of debt, in 2007 it forgave another $32 million and $30 million was wiped out in 2010. In 2011, China committed to Cameroon by agreeing to build and finance a new port in the fishing town of Kribi. Cameroon was considered a relatively peaceful nation in a war-torn region and seemed a stable place to invest. China's activity in Cameroon is not restricted to the new port, it was responsible for 90% of road construction and restoration in the country as of 2014. Chinese companies have also built dams and hydroelectric power facilities in the West African country
A special representative of China’s President, Yang Jiechi met Cameroon President Paul Biya in the capital Yaounde and wrote off the country's debt. China issued no press release, and the Cameroon government did not mention the debt cancellation in its brief of Yang's visit.
Chinese Foreign Ministry spokesperson Hua Chunying said "China agreed to waive the interest-free inter-governmental debt that Cameroon had not paid back by the end of 2018”. Cameroon's total debt is 5.8 trillion Central African CFA francs ($10 billion), about a third of which is owed to China, according to the International Monetary Fund.
Cameroonian economist Ariel Gnitedem says the cancelled amount looks paltry in comparison with the total debt and says it could actually be for China’s long-term benefit. “China wants to control the sub-regional market and Cameroon is the gateway,” he said. “It is possible they (the Chinese) also want a greater share in the enormous natural resources in Cameroon which are essential to feed China’s home industries.”
According to Yang, Chinese are not exploiting Cameroon. Government of China and Cameroon have routinely rejected the concerns stating that the relationship was based on mutual respect for both parties. China will help Cameroon develop its economy and improve people's livelihood, continue mutual support on issues concerning each other's core interests and major concerns, and promote communication and collaboration on international and regional issues, said Yang.
The West African nation is battling a Boko Haram insurgency in the north. Due to the unrest, Cameroon has been stripped of the right to host the 2019 African Cup of Nations, the continent's quadrennial soccer championship, which will now take place in Egypt.
President Biya, who has ruled Cameroon for 36 years, is increasingly looking like an "inappropriate partner" from a business standpoint as China faces growing scrutiny on the continent. "Cameroon in every way, shape or form is getting worse by the day in every metric," says Roberts. "This regime has dismantled whatever foundations it had for a stable economy."
"The Gulf of Guinea is strategic for China," says Xavier Auregan, a specialist on China-Africa relations explaining that a foothold there strengthens its interests in West Africa from the Ivory Coast to Gabon. China's decision to provide Cameroon with debt relief also comes at a fraught moment between the country's traditional gold-mining community and Chinese mining companies.
Our assessment is the Kribi port is an important part of President Xi's massive multinational One Belt One Road economic development plan. It can be also noted that China is a resource poor nation and is likely to be focused on extracting the continent’s natural resources. It is likely that Beijing's leniency toward Cameroon could prompt other heavily leveraged nations, such as Ethiopia, Djibouti and Zambia, to expect similar treatment, in return for their strategic assets.