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Berlin urges G8 to scold China over lending to Africa

Finance ministers from the world's richest nations yesterday sought ways to improve financial management in Africa and were asked to scold China for lending too freely to African countries.

Ministers from Britain, Canada, France, Germany, Italy, Japan, Russia and the US -- the G8 -- reconvened for a second day on the shores of Lake Schwielowsee, just outside Potsdam, in preparation for a wider summit of G8 heads of state and government in early June.

Topping the agenda were German proposals for increased transparency in hedge funds and the need for sound financial practices in Africa.

Yuan flexibility

The previous day's proceedings were overshadowed by the resignation of World Bank President Paul Wolfowitz and China's decision to increase the flexibility of the yuan.

The G8 is currently under fire for failing to deliver on promises two years ago to to increase annual aid to the world's poorest countries by US$50 billion by 2010.

For the first time, representatives from five African nations, Nigeria, Ghana, South Africa, Mozambique and Cameroon, attended the talks on Friday.

Ghana's finance minister, Kwadwo Baah-Wiredu, signaled his disappointment that G8's pledges had not been fulfilled.

The international aid agency Oxfam charged the G8 with wanting to avoid discussion on the "massive shortfall in promised aid" and to focus instead on budget transparency.

But the G8 and its current host, Germany, argue that aid must be linked to good financial governance in African countries to ensure the money is not squandered, triggering a new debt spiral.

Financial governance

And Berlin wanted the G8 to call China into line on its policies on lending to Africa.

"Strong financial governance plays a critical role in supporting development in Africa," Berlin said in its draft of an action plan to be discussed by G8 ministers.

"Against the background of higher aid flows, debt relief and increasing revenues from natural resources in Africa, good governance is receiving increasing attention," the draft text stated.

The ball was therefore in the court of the African countries, Germany said.

"The primary responsibility for improving financial governance rests with national governments," it said.

At the same time, donor countries also had a duty to ensure that borrowers met good governance criteria when providing aid, Berlin said.

In this respect, it singled out China for criticism for lending money to Africa too freely without checking where it was going or if it could be repaid.
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