China’s vast Africa investment hits a snag in Congo

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Paris: China’s investment strategy of throwing money at developing countries appears to have hit a snag in the Republic of Congo as the central African nation is seeking an International Monetary Fund (IMF) bailout.

While the funding it provided to Congo wasn’t part of the Belt and Road Initiative, which China was promoting this week, it serves as a cautionary tale of the trouble Beijing could face with its plan for massive investments in maritime, road and rail projects across 65 countries from Asia to Europe and Africa.

But despite the recovery of oil prices, the country, also known as Congo-Brazzaville, has had trouble getting back on top of its finances and has asked the IMF for help. In addition, as the IMF can only lend if it judges that a country’s debt load is sustainable, a bailout may be accompanied by a restructuring of government debt.

Julien Marcilly, chief economist at Coface, a firm that provides payment insurance for French companies, said China “went full-tilt on lending in recent years, often to countries which produce and export raw materials, in particular oil”.It is only now that “Beijing is beginning to realise that problems can build up”, in particular after Venezuela defaulted.

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