Chinese Foreign Minister, Wang Yi is travelling through the Indian Ocean Region (IOR) from January 4 to
9. He will be visiting Eritrea, Kenya, the Comoros, the Maldives, and Sri Lanka, all face a financial crisis
and have debt issues to be addressed. Eritrea joined China’s Belt and Road Initiative (BRI) in November
2020. The BRI in Eritrea gives China a foothold in the strategic Horn of Africa and the Red Sea. In Kenya,
Wang Yi is likely to seek to ensure that huge Chinese loans do not become a prominent political issue ahead
of the Kenyan general elections in August 2022. Nairobi could ask Wang Yi to restructure its debt, but
Chinese lenders have been reluctant to offer debt relief. New deals were signed during a high-level bilateral
forum on January 6, that was officiated by Foreign Affairs Cabinet Secretary, Raychelle Omamo, in the
presence of China's Foreign affairs Minister, Wang Yi, among other officials. In the memorandum of
understanding (MOU), a total of six deals were signed, among them trade and agriculture, which also
accorded Kenya a green light to export avocados and fish to China. Other sectors that will benefit from the
deal are agro-processing, textile, leather processing, footwear, furniture, construction among other sectors.
The Ministry of ICT Innovation and Youth Affairs and the Ministry of Commerce of the People’s Republic
of China also signed an MOU that recognizes digital economy as an important driver of global economic growth and the potential for bilateral cooperation between Kenya and China. The agreement will allow both
countries to explore areas for investment cooperation in the digital economy aligning with Kenya's vision
2030. In order to promote trade and reduce deficits, the two countries signed an agreement on the
establishment of a working group tasked with addressing tariffs and non-tariffs barriers. From Kenya, Wang
Yi goes to the Comoros, which is dependent on external aid and has been depending primarily on China since
2014. China has major infrastructure projects in the archipelago and China had forgiven Comorian debt in
November 2018. For the Maldives high debt remains a problem and its public debt stood at US$ 5.6 billion
at the end of March 2021. The Maldives’ debt to China is estimated to be 78% of its total external debt. Sri
Lanka is seriously affected by debt and could ask Wang Yi for relief. China is the second-largest foreign
lender to Sri Lanka, but it accounts for just over 10% of the overall debt. Most of the loans had been taken
from the international market on commercial basis. As far as China is concerned, Sri Lanka had obtained a
Foreign Currency Term Financing Facility (FTFF) of US$ 1 billion from the China Development Bank (CDB)
in 2018, and another US$ 500 million in March 2020. In early April 2021, Sri Lanka signed an agreement
with the CDB to obtain US$ 500 million as an FTFF. Sri Lanka could also draw on a Chinese currency
denominated swap with the People’s Bank of China for US$ 1.5 billion, that could be used for paying for
imports from China. Days before Wang Yi’s visit (January 8-9) the issue of organic fertilizer issue imports
from China was resolved by negotiations. It is not clear if the Chinese Foreign Minister will extend further
financial help or reschedule debt repayment to help Sri Lanka manage the severe dollar shortage. Wang Yi
is expected to take steps to strengthen relations with Sri Lanka through new investments, especially in the
Colombo Port City (CPC) built by a Chinese company
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