Apr 18, 2021 News
Kaieteur News – A damning report recently released by the Centre for Global Development (CGD) is calling for the disclosure of all debt contracts, as “public debt should be public.”
The report titled: “How China Lends; A Rare Look into 100 Debt Contracts with Foreign Governments,” which was done in collaboration with “AidData”- a research lab in the US and other entities, assessed 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America and Oceania.
The report first outlined that China is the world’s largest official creditor, but the world often lacks basic facts about the terms and conditions of its lending. According to the report, that is because “very few contracts between Chinese lenders and their government borrowers have ever been published or studied.” It was also asserted that the report is the first systematic analysis of the legal terms of China’s foreign lending.
Based on their analysis of the contracts, it was highlighted in the report that Chinese contracts usually contain unusual confidentiality clauses, barring their borrowers from revealing the terms or even the existence of the debt. The contracts even reek of cancellation, acceleration and stabilisation clauses, which potentially allow the lender to influence an indebted nation’s domestic and foreign policies. “Even if these terms were unenforceable in court, the mix of confidentiality, seniority and policy influence, could limit the sovereign debtor’s crisis management options and complicate debt renegotiation,” the report posited, adding that overall, the contracts are skewed in a way to overcome enforcement hurdles, making China a “muscular and commercially-savvy lender to the developing world.”
Further to that, their study of Chinese foreign loan contracts reveals that Chinese lenders cleverly adapt and expand standard contract tools to maximise their repayment prospect, which includes lender-controlled revenue accounts, and protect a wide array of Chinese interests in the borrowing country.
To that end, the report emphasised the need for substantially greater transparency in sovereign lending, including but not confined to government-to-government loans. It even went as far as noting that while China may be one of the world’s largest official creditors, transparency problems existing in large numbers around the world – as it relates to sovereign debt are not limited to China. “Almost no official OECD (Organisation for Economic Co-operation and Development) and non-OECD lenders publicly release the text of their loan contracts. Nor do debtor governments,” it lamented. The OECD is an international organisation, which many countries are signed on to and aims to build better policies for better lives.
As such, the report lays the firm conviction that disclosing all debt contracts, while it may be difficult politically, should “become the norm rather than the exception” because it would give citizens the ability to hold their governments accountable “for the debt contracts signed in their name.” Hence, the report outlines that “public debt should be public.”
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