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China sets ‘aggressive’ terms on Uganda airport loan

A leading China lender has imposed “aggressive” repayment terms on a $200 million loan to expand Uganda international airportUS-based research lab AidData said Monday, criticizing the bank for forcing the government to repay its debt before funding public services.

Chinese state-owned banks are the largest source of infrastructure financing for Africa and have been criticized for their predatory lending practices, although details of contracts are rarely made public.

Under the loan from China’s Exim Bank to upgrade Entebbe airport, the Ugandan government is to transfer all revenue from the country’s only international airport to an account held with the lender, according to the contract signed on Monday. published by AidData.

The government must then use a portion of the revenue each year to repay the loan before it can invest in public services.

“These are (more) aggressive terms than what we’ve seen before,” Bradley Parks, executive director at AidData, told AFP, saying the contract “limits the government’s fiscal autonomy”.

The state-owned China Communications Construction Company started repairing runways and building new airport hangers in Entebbe in 2016. The work is expected to be completed this year.

Chinese creditors – unlike other developed country lenders – require governments to deposit some revenue from major infrastructure projects into bank accounts they manage to serve as collateral.

But the contract for the Ugandan airport continues.

“The lender asks for revenue not only from the new projects they fund, but also from the underlying assets — or the airport — that already exist,” Parks said.

Built in 1951, the airport generated about $68 million in annual revenue prior to the expansion project, and the money was used to fund public services, according to Parks, citing government data.

The project sparked public outcry last year after Ugandan media reported that China will take control of the airport if the Kampala government defaults, 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 step up its efforts to provide debt relief to poor countries struggling to repay after the pandemic has ravaged their economies.

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