Debt Diplomacy: Five Realities that African Countries Must Face

Published on 9th July 2019

Loans and debts are necessary for national growth in many African states.

Each country seeks to discuss and negotiate loans from positions of relative strength and it is for each country to know its own strengths and weaknesses, as well as those of the other parties, before entering into discussions. This assumes that the people entrusted with running the state know what the national interests of that state are and that they have the capacity, competence, and commitment and most important loyalty to the interests of the state that has entrusted them. They then should be able to safeguard those interests while interacting with representatives of other states. Policy makers need to question themselves on whether they have the right people on their side when entering into debt negotiations. It makes no sense to grumble afterwards that the country was cheated by the Americans, the assorted Europeans, or the Chinese when all they did was to look after their national interests. 

Big creditor countries do not want debtor states to get out of the debt conditions.

Master states fear losing leverage on the client states. To a large extent, Kenya was treated to a shock doctrine between 2003 and 2008 and virtually brought to its knees for trying to reduce its debt liabilities on such things as budgeting. It had tried to make “aid” irrelevant only be forced deeper into the condition of dependency than it had been before. One representative of a master state had insisted that for Kenya to have “civilized relations” with the Euros, it had to do what the Euros wanted. Attempts to appear independent from the master state in thought and action, therefore, is a perceived threat and rebellion to policy makers in the master states who then go out of their way to smash the supposed rebellion.

The Euro and the Chinese lenders to African countries have both economic and political reasons for lending.

There is no altruism on anyone’s part; it is all about advancing and protecting perceived national interests. They at times fight their ideological and geopolitical battles in the African terrain and the narratives about African debt trap or debt burden is part of that power play. African interests, therefore, are not priorities in the minds of those Euro and Chinese policy makers as they compete for global influence. For African countries, choosing whom to borrow from and for what purpose demonstrates a country’s ability to exercise prudent debt diplomacy. The number of the countries that do so is debatable.

When borrowing, African countries need to take into account the domestic and external political forces that can derail a well thought out development investment project.

Large companies that tend to control policy makers in both creditor and debtor countries do not necessarily have the interests of either country and can hold states hostage. They do this often through local politicians or bureaucratic saboteurs who undermine implementation as they pursue political/ideological arguments or such corrupt private interests as “cuts”, “commissions”, and “percentages” before action can take place. Countries also have to worry about external interests that feel threatened, in the long run, by specific projects such as SGR or the LAPSSET and then go out of their way to undercut it. When the internal and external forces of hostility combine, the debt is made to look odious. The debate that follows is part of debt diplomacy that calls for high craft and determination.  

Strong countries give loans as instruments of their own foreign policy either to enhance images or to extract raw materials and exercise political leverage.

Making other countries incur debts is part of national wealth creation; failure to pay becomes an excuse for exercising not only gun boat diplomacy, but also geopolitical demands using instruments of postmodern colonialism. When militarily weak states are the creditors, they fall in danger of invasion as a way of powerful debtors writing off their own debts to the militarily weak states. It happened with the 1830 French invasion of Algeria, the 1840s British invasion of China to change the balance of trade, and the Franco-American invasion of Libya in 2011 to destroy Libyan prosperity for being too independent.

By Prof Macharia Munene

Professor of History and International Relations, United States International University (USIU), Nairobi, Kenya.

This article has been read 2,099 times