“Uhh!” groaned Verum, “My poor brain feels like jelly!”
“Why? Is it wobbly?” said Scorch with a smirk.
“Haha,” said Verum with a straight face, “No, it’s the news! There might be tension between China, a country in Asia, and Uganda, a country in Africa over an airport.”
“I think I need a lot more details,” said Scorch.
“So do I. Let’s start at the beginning,” said Verum, “In 2015, Uganda wanted to expand the Entebbe International Airport – its only international airport. To do so, the country signed a loan agreement with the Export-Import (Exim) Bank of China on 31st March 2015. The Exim Bank gave Uganda a loan of $200 million.”
“So far, I’m following,” said Scorch, adding, “A loan is a sum of money that is borrowed and is to be paid back with an additional fee, called interest.”
“According to a report published in a popular Ugandan newspaper, the loan agreement has some provisions (conditions) that are unfavorable to Uganda,” said Verum, “If the country fails to repay the loan, China could take over the assets owned by the Ugandan government.”
“Oh, that is a dangerous territory to tread on,” said Scorch.
“One of the clauses of the agreement was also that the annual budget of the Uganda Civil Aviation Authority (UCAA) is to be shared with the Exim Bank for approval. When Exim Bank realized Uganda was not fulfilling such unfavorable clauses, it froze the cash flow to Uganda. This delayed the project by 361 days.”
“Soon after this, the pandemic began. So, Uganda tried to renegotiate the clauses. An eleven-member team was sent to China to negotiate with the Exim Bank. Dr. Chrispus Kiyonga, Uganda’s ambassador to China, led the team,” said Verum.
“And you’re saying they didn’t succeed?” said Scorch.
“Well, partially. China agreed to start paying for the project but rejected the change to the clauses,” added Verum.
“This is worrying because Uganda could be falling into China’s ‘debt trap‘ diplomacy,” said Scorch, “China provides loans or projects to countries as a part of the Belt and Road Initiative (BRI). But the terms of this loan make it too difficult for borrowing parties to repay the loan. And China then takes over their assets.”
“However, both Uganda and China have denied the reports,” said Verum with a shrug.