|Barrow with Xi|
With a struggling economy and a political transition program on life-support, the Barrow-led transition government finds itself adding to its long list of self-inflicted problems, leaving a trail of lingering questions in search of answers to the potential dangers a debt overhang poses if The Gambia goes all in, head first, with Chinese President Xi’s Belt and Road Initiative (BRI).
The Gambian delegation to the 2018 edition of the Heads of State Summit of the Forum on China – Africa Cooperation (FOCAC) returned home yesterday but nit before they signed three BRI Cooperation Agreements on infrastructure, economic cooperation and culture, according to a press release from State House.
President Barrow used the occasion of the signing to outline his transition government’s priorities of “making electricity affordable and accessible, the expansion of the seaport of Banjul, road networks, mechanization of agriculture amongst others”, the press release elaborates.
Serving as backdrop to this year’s FOCAC Summit were numerous stories on financially-distressed economies in middle and low income countries aggravated by, if not the result of, what had been characterized as China’s “debt trap diplomacy” that deliberately entices this category of countries to sign loans beyond their capacity to service, leading to defaults with dire consequences.
We wrote in our August 10th, 2018 blog post, which you can find here, that increasing number of countries are falling prey to what a bipartisan members of the US Senate referred to as predatory lending practices resulting in applications for bail-out loans from the IMF to repay loan arrears to China. Sri Lanka was the first in line to seek a bail-out loan of $1.5 billion from the IMF to repay China.
Pakistan’s recently-installed Prime Minister is contemplating a similar move. Djibouti strategic location has attracted Chinese interests to the point of ceding control of the country’s only container terminal to Pekin. We can now add Zambia to a growing list of loan defaulters leading to the surrender of the country’s power utility company (ZESCO) to China as a result.
The heightened criticism of China’s aggressive push into Africa and its “debt-trap” strategy has caused the Chinese president Xi Jinping to deny that its bilateral cooperation strategy is not to finance “vanity projects” using predatory lending practices as claimed in Western capitals but to help Africa remove main barriers to development, namely inadequate economic infrastructure.
Returning from the China Summit, the president of Botswana announced that the Chinese have extended a loan for rail and road infrastructure as well as writing off some debt which may suggest that they – the Chinese – are becoming increasingly sensitive to the rising international criticism about their policy towards African.
Vanity projects are not limited to an African Head of State immortalizing himself in a statue built with an Ex-Im Bank of China loan but are equally applicable to an infrastructure project that will only add to the public debt that has already been declared unsustainable as is the case of The Gambia.
The Finance Ministry under Amadou Sanneh had made this very clear and documented that the Port Development Project, as initially proposed and estimated to cost $177 million, is not a financially viable proposition. As the debt-to-GDP figures in 2016 and 2017 will show later, it would be a fiscally irresponsible act to proceed with the project as is. We hope, therefore, that Mambury Njie, the current Finance Minister, will equally display fiscal responsibility.
In addition to the high debt sustainability levels, the procurement rules were flouted by State House and the Minister of Works by awarding all components of what would be the biggest project ever to a single company. The decision to sole source the entire project constitutes a procurement malpractice and should neither be approved nor tolerated. Government should have invited two or three other Chinese companies – since it will financed entirely by the Ex-Im Bank of China – to submit bids.
Resisting the pressure from the Minister of Works, Bai Lamin Jobe and Office of the President will be the challenge facing not only the Finance Minister but the entire GPA Board that will probably meet the same fate as the NAWEC Board that was summarily dissolved last week. The GPA Managing Director who provided the effective stewardship of ports operations that resulted a net after tax profit of D198 million in 2017 from D13 million in 2016 was unceremoniously and without notice transferred to the Public Procurement Agency, an ineffectual behemoth of an agency that deserves dissolution more than the other victims purged to pave the way for the impending Chinese wave. You can find our last June blog post on the persistent lack of transparency in Gambia’s public procurement system here.
The IMF has told the transition government of Adama Barrow in June that Gambia’s debt vulnerabilities have risen since January – February 2017 with the debt-to-GDP ratio reaching nearly 130 percent of GDP from 120 percent the previous year under Jammeh. The transition government in one short year has added 10 percent to the debt-to-GDP ratio.
With figures like these, a government in transition with no governance experience to speak of and, emerging from 22 years of brutal dictatorship that has left the economy in tatters, the question of whether the country can withstand the consequences of a Chinese loan default becomes academic. The Gambia cannot endure a Chinese “debt trap” and therefore the need to navigate these treacherous waters soberly with the national interest above personal interest in mind.
Recommending that we move with caution and fiscal prudence as guide is not a statement against building strong and mutually beneficial ties with China. We have used these pages in the past to support severing ties with Taiwan in favor of China in furtherance of a One China Policy. However, supporting the One China Policy was not meant to be at the expense of the economic, political, social and cultural viability of the smallest country on the African continent.
The national character of the country must be maintained at all cost. And when the national security including the country’s independence and sovereignty are put at risk – for whatever reason or reasons – Gambians must stand up and voice their opposition.