This is what India’s $10 billion loan means for Africa
The third edition of the Indian-Africa Summit came to an end on the 29th October, 2015 in New Delhi, India. This year’s summit had in attendance more than 40 African leaders, foreign and trade ministers and senior officials. Notable African leaders at the Summit include Egypt President Abel Fattah Al Sisi, South African President Jacob G. Zuma, King Mohammed VI of Morocco and Nigeria President Muhammadu Buhari.
During the summit India offered to give Africa a soft loan of $10bn with an additional grant of $600 million and 50,000 scholarships for African students over the next five years. This is not the first time India is offering Africa a “soft” loan, in 2011 the country gave Africa a soft loan of $5bn.
Ventures Africa interviewed Ifediora Amobi, an economic expert and the Executive Director of African Heritage Institution on what the $1o billion concessional loan means for Africa.
Ventures Africa (VA): India announced that it was going to give 54 African countries a concessional loan of $10 billion, what’s you view on this?
Ifediora Amobi (IA): Every economy needs some financial assistance and I am not against borrowing or a loan. What I am more concerned is how the loan is used. When the prime minister of India announced the $10 billion concessional loans to African countries, I was shocked. Although it sounds like a lot of money but when you consider the fact that we have about 40 African presidents at the summit in New Delhi then you know that the money is small. For instance in a country like Nigeria $10 billion is less than the Lagos state’s budget in a year. I don’t actually know the sectors or areas the fund is going to be used. Would it be for security, education, agriculture or health.
VA: What is your take on the $600 million grant?
IA: Yes, $600 million is a grant and a grant is free money. $600 million grant to a continent of over 50 countries, it doesn’t really scratch the surface unless the country is really willing. One of the things the former minister of finance was encouraging which everybody was always attacking her for was that we should borrow but we should use concessional loans as against those high interest loans so that even if our debt is 100 billion, the interest would be 1 percent and that is better than 60 billion with 20 percent interest. So you are taking cheap money to pay up expensive ones. So they are giving out $10 billion dollars not to each country but to the whole continent on a concessionary basis.
VA: How do they (India) intend to monitor the way the loan is spent?
IA: Indians are ready to monitor this loan by ensuring that these loans are utilized. But the big question here is, what is really the motive behind this summit ? In 2008, I attended the first summit, promises were made of course and you know in every sector, good speeches but between 2008 and now which is almost 6 years, can we really say a lot has been achieved with the partnership with India. I am going beyond the $10 billion because I know India feels threatened by China.
VA: So, this could be a competition between India and China for Africa?
IA: Absolutely, India is competing with china indirectly but India wants to also invest in Africa because its is a continent that does not think for itself. We let others think for us, we let others lead us. Why would all our presidents leave our continent for India, why can’t the Indians come here if it is for our benefit? There are quite a lot one can actually look at and I think we need Africa still have natural resources and India feel it is a good idea since Europe has benefited from this in the past, America has benefited too, the Chinese are doing it now and are reaping benefits from it and Indians also wants to benefit. So are we really thinking as Africans?? Is there really a hidden agenda, is there a motive?
VA: Don’t you think India is doing this to rally for a permanent seat in the United Nations Security Council?
IA: It is 99 percent likely.
VA: As an attendee of the 2008 summit, did you do a follow up on how the loan was used ?
IA: Well, I left in 2010 so it was not really enough time to know. I did not really monitor it.
VA: What has been the attitude of African countries to loan?
IA: African countries have had some issues with loan. Nobody knows but however, it is up to Africans to decide what the loans would be used for. It has to meet certain criteria set by the Indian government for both India and Africa.
VA: Did African leaders request for this loan or were they given as a dividend for the summit?
IA: No! One rule of it is that the history in credit line is the same way in banking. The bank give you a facility that you can draw from but you cannot just walk in and take your money and walk out because it is not your account. You have to apply and draw from the credit facility made available. That is how the concessional loan also works. The $10 billion facility is there, but the problem now is how it is going to be settled so that a country like Nigeria would not request for $10 billion dollars. Is the loan going to be based on the size the country or size of the economy or based on the population so that everyone benefits. These are the things the Indian government has to work on.
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