Top Stories / National
Wednesday, 04 Oct 2017 13:14 EATnewsdesk@kenyafreepress.com
As Kenya continues its borrowing spree from China, it is important for the people to spare a thought for a recent ruling in a U.S. court where a Chinese bank had sought orders to auction assets of Guinea Bissau, the poor West African country, over a Sh2.5 billion debt outstanding since 1990.
In 1990, the China Exim Bank executed two loan agreements of US$15 million and US$12 million to the Government of Guinea-Bissau and the Central Bank of Guinea-Bissau, respectively. Beginning in 1994, however, both loan recipients were unable to meet payment obligations.
The debts were included in the debt reconciliation exercises associated with the Heavily Indebted Poor Countries Initiative, but remained outstanding even after Guinea-Bissau successfully completed and exited the HIPC initiative in 2011. This eventually led to a 2016 lawsuit launched by Exim Bank in the Southern District of New York.
Facing legal action, Guinea Bissau reached out to the Africa Legal Suport Facility for assistance, which provided creditor litigation support and advisory services to Guinea-Bissau during outstanding debt negotiations with the Exim Bank of China. The support led to a series of settlement and debt-restructuring negotiations concluded in Singapore. Guinea-Bissau and Exim Bank agreed to a 90% reduction in outstanding debt obligations, resulting in savings of over US$45 million for Guinea-Bissau.
Exim Bank entered into settlement negotiations with the country to address outstanding debts of US$50 million, with the Bank making substantial efforts to ensure a settlement was reached, The Bank also took into account the financial capacity of Guinea-Bissau and recognized the country’s efforts to establish sustainable structural reforms.
On September 12, the Minister of Economy and Finance of Guinea-Bissau, João Alage Mamadu Fadia, and the Chief Compliance Officer of Exim Bank, Charles Day, signed a Memorandum of Understanding (MOU) which formalized an agreement that the reconciled debt of US$50 million be reduced to US$5 million. Subsequently, on September 18, the compromise and settlement agreement was finalized and signed by the Minister and the President of the Export-Import Bank of China, Pei-Jean Liu.
Jack is a business and society writer at the Kenya Free Press