China cancels around CFA1.5 billion of Togo’s debt

Economic governance

Friday, 26 August 2022 03:40

China cancels around CFA1.5 billion of Togo’s debt

(Togo First) - The cancelation was announced last June by the Togolese minister of affairs, Robert Dussey.

China recently canceled part of a debt Togo owes it. The news was confirmed on August 18, by the Chinese minister of foreign affairs, Wang Yi.

Though the Asian side is yet to disclose the exact amount canceled, Robert Dussey, Togo’s minister of foreign affairs, put it at ¥16 million (about CFA1.5 billion). Dussey reported the figure via a tweet dated June 29, 2022. The debt, the official wrote, was interest-free and due in 2021.

Je remercie M. Wu Peng, DG Afrique et SG du comité de suivi du #FOCAC pour l’Annulation de 16 millions de Yuans Renmimbi, soit 1,5 milliards de francs CFA, de dettes de prêts sans intérêts arrivées à échéance en 2021. ??. @MFA_China pic.twitter.com/qwQiKadtBW
— Robert Dussey (@rdussey) June 29, 2022

A generous lender?

Togo isn’t the only country to benefit from the debt cancelation measure. The Middle Empire, indeed, extended its kindness to 16 other nations. The Asian giant wants, through the move, to show its Western critics that there is no “Chinese debt trap”. Several Western countries, the US first, claim indeed that China significantly contributes to Africa’s debt increase, with its not-so-favorable loans. Beijing disagrees.

"Loans that China granted had fixed interest rates and lower than the commercial rates and the rates of loans granted by the African Development Bank (ADB), which are generally between 4 and 10%," answered Wang Wenbin, spokesman for the Chinese Ministry of Foreign Affairs (MFA).

The minister of foreign affairs himself, Wang Yi, argues that China and Africa have a win-win partnership, especially regarding debt relief. The diplomat reports that between 2000 and 2019, China canceled $3.4 billion of debts it was owed. In 2020, Yi added, Beijing restructured about $15 billion of debts, including CFA5.7 billion; In line with the G20 debt relief plan for poor countries. Togo benefited from the restructuring.

Eximbank, a key partner

Togo’s biggest external lender, it is worth noting, is Eximbank China. It comes even before institutions like the IMF (CFA200 billion) and the World Bank’s International Development Association (IDA)(CFA52 billion).

Togolese authorities attribute this situation to Eximbank China’s great contribution to the development of Togo. "It should be noted that Eximbank China's financing has made it possible to carry out major infrastructure projects, especially the rehabilitation and extension of the GNASSINGBE Eyadema International Airport and building bypass roads in Togo,” the authorities said.

More favorable terms are another reason Togo borrows a lot from Eximbank China. The debt Togo owes the bank is repayable over 20 years, with a 7-year grace period. Also, the interest rate, 2%, is fixed. This is better than the 4.5% rate paid on loans secured from France’s Société Générale and Japan’s MUFG Bank, two other commercial partners of Togo.

Since Togo considers Chinese loans to be more favorable (yet, they are getting scarcer in Africa), the country plans to get more of them for its projects. These include the expansion of the N°1 National Road. This project, Lomé affirms, will help Togo better serve its landlocked neighbors, and strengthen its position as a logistics hub in Africa.

Written by: Fiacre E. Kakpo

Translated from French by Schadrac Akinocho

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