A Railroad to Nowhere and a Debt That Keeps Going

Stubborn Thing: Each year, Kenya spends $1 billion just to service its debt to China for a railway project that is still hundreds of kilometers short of its intended destination.

A quarter century ago, the “Drop the Debt” movement brought together a broad coalition of leaders —Pope John Paul II to Billy Graham, Bill Clinton to Tony Blair, Muhammad Ali to Bono (or as Clinton dubbed it, the “Pope to the Pop Star”) —to demand debt forgiveness for many of the world’s poorest countries. Part of the broader Jubilee 2000 campaign, the logic of the cause was simple and compelling: foreign debt in many of these countries had risen so high that it was threatening their ability to meet the basic needs of citizens.

The movement helped produce impressive results. More than three dozen countries received significant debt relief, and some of the poorest —like Sierra Leone, Liberia, and Malawi— saw nearly all of their external debt cancelled. Just as importantly, the debt relief was provided conditionally: in order for countries to see significant portions of their debt forgiven, the “savings” had to go towards health, education, and other essential public services.

Back Against…and Bigger Than Ever

Sadly, just twenty five years later, public debt levels are soaring once again. In Africa, reports the New York Times, total foreign debt has surpassed $1.1 trillion—many times higher than the days of Jubilee 2000. And that debt has been made even more painful by a series of economic shocks that have hindered economic growth and fed inflation…shocks like the fallout from COVID-19 and disruptions in fuel and fertilizer caused by war in Ukraine (and, now, the Middle East). According to global think tank ODI Global, Africa’s median public debt is approaching 60 percent of GDP.

All of which means that leaders in high-debt nations are once again facing painful choices as they struggle to simultaneously provide basic services, invest in job growth for their young citizenry AND service their debt obligations. In 2024, Kenya’s William Ruto tried to meet the challenges of a multibillion dollar debt to China by through a package of modest spending cuts and tax increases. Huge crowds (many of them young people) took to the streets and, at one point, the parliament building. They essentially brought their country to a halt. Ruto quickly withdrew his fiscal package, but officials have already made plans to reintroduce some of the measures in an effort to stave off default and late payment fees.

While China is far from the only creditor for most high debt nations, it is easily the largest public creditor. Beijing holds over 70 percent of Kenya’s foreign debt and over 80 percent of Nigeria’s.

Each year, Kenya spends $1 billion just to service its debt to China for a yet-to-be-completed railway project that was to link the port city of Mombasa with Kisumu on Lake Victoria and, eventually, the Ugandan border. While the dream of linking Mombasa to Lake Victoria and Central Africa has always been alluring, the reality to date has been deeply disappointing. The railway project has been over budget and behind schedule, and ridership revenues for the completed portion have done little to offset costs (though officials argue that will change once Kisumu is connected).

In other words, at a time when citizens are grappling with unemployment and inflation, the government finds itself forced to pay off the lingering costs for a project the public believes has already failed. And Beijing has shown little interest in helping out with debt forgiveness for Kenya —or anywhere else.

The Role of Debt Relief: An Essential “Grand Gesture”

PEPFAR (the President’s Emergency Plan for AIDS Relief) is rightly regarded as the most successful international development program since the Marshall Plan. As one of those who helped to secure its passage through Congress, I wonder if we could have been successful without the enactment of debt relief —and the global movement which forced it onto the agenda of donor nations. As debt relief became a reality, PEPFAR was created…so too the Millennium Challenge Corporation and other key initiatives. World leaders instinctively understood that if poor nations were to have any hope of tackling poverty, conquering terrible diseases, or providing education and opportunity for their citizens, then easing the crushing debt burden many countries faced was a necessary first step

Just as we were a quarter century ago, many leaders are talking about a new approach to international development. But can a new approach succeed —can any approach succeed— when many leaders in the developing world are feeling the weight of massive external debt? Are creditors, especially China, prepared to make the kind of grand gestures that helped make so much possible twenty-five years ago?

In 2000, when he signed legislation that forgave $435 million of US-held  public debt, President Clinton proclaimed his belief that the move would “put our country squarely on the side of humanity for a very, very long time.” Are others ready to join humanity’s side these days?