A leading Chinese lender has imposed “aggressive” repayment terms on a $200 million loan to expand Uganda’s Entebbe International Airport, US research lab AidData said on Monday, criticizing the bank for forcing the government to repay its debt before funding public services.
Chinese state banks are Africa’s biggest source of infrastructure finance and have been criticized for their predatory lending practices, although contract details are rarely made public.
Under Chinese bank Exim Bank’s loan to upgrade Entebbe airport, the Ugandan government is required to channel all revenue from the country’s only international airport to an account held jointly with the lender, according to the contract released on Monday. by AidData.
The government is then required to use part of the revenue to repay the loan each year, before it can invest in public services.
“These are (more) aggressive terms than what we’ve seen before,” Bradley Parks, executive director of AidData, told AFP, saying the contract “limits the government’s fiscal autonomy.”
The state-owned China Communications Construction Company began repairing runways and building new airport hangars in Entebbe in 2016 and work is expected to be completed this year.
Chinese creditors – unlike other lenders in developed countries – require governments to deposit a portion of revenues from major infrastructure projects in bank accounts they control to act as collateral.
But Uganda’s airport contract goes further.
âThe lender is not only asking for revenue from the new projects it finances, but also from the underlying asset â or the airport â that already exists,â Parks said.
The airport, built in 1951, generated about $68 million in annual revenue before the expansion project and the money was used to fund utilities according to Parks, citing government data.
The plan sparked public outrage last year after Ugandan media reported China would take control of the airport if the Kampala government defaulted, a claim Beijing later denied.
China Exim Bank did not respond to a request for comment.
US Treasury Secretary Janet Yellen said this month that China should contribute more to global efforts to provide debt relief to poor countries struggling to repay after the pandemic hit their economies.