Is Beijing a predatory lender? New evidence from a previously undisclosed loan contract for the Entebbe International Airport Upgrading and Expansion Project

AidData's publication of the final, unredacted version of a controversial loan contract between China Eximbank and the Government of Uganda for the Entebbe International Airport Upgrading and Expansion Project reveals that the airport itself—a physical, illiquid asset—is not a source of collateral that the lender can seize in the event of default. Instead, China Eximbank required its borrower to provide a fully liquid source of collateral: a cash deposit in an escrow account that the lender can unilaterally seize in the event the Government of Uganda defaults on its repayment obligations. The lender also took the extraordinary step of demanding that all revenues generated by Entebbe International Airport—a public infrastructure asset that existed prior to the loan issued by China Eximbank—be used to repay the loan on a priority basis for 20 years. At the same time, the Government of Uganda’s efforts to renegotiate with China Eximbank demonstrate that those who borrow from Beijing have agency and can successfully push back on lender conditions that they consider to be overly intrusive. China Eximbank initially demanded the right to approve or reject the spending decisions of the government agency responsible for the Entebbe International Airport. However, when the Ugandan authorities protested, China Eximbank agreed to a less intrusive arrangement, which grants the lender the right to monitor but not control the spending decisions of the Uganda Civil Aviation Authority.