BRI-recipient countries in Sub-Saharan Africa, it identifies fewer projects and much lower amounts of investment (about 300 billion, compared to about 500 billion in the Bank’s database) in 2017 and 2018.

Ideally, this paper should use debt financing related to identified BRI projects, but the information is not readily available. Two publicly available large databases track lending from China. These are Aid Data from compiled by researchers at William and Mary College<sup>9</sup> and the China Africa Research Initiative (CARI) from John Hopkins University School of Advanced International Studies.<sup>10</sup> Unfortunately, both sources of lending data have severe limitations for this paper: both databases identify borrowing or commitment only up to 2014, just one year after the announcement of BRI; no loan is identified as related to BRI; and the CARI tracks lending only to Africa, which includes only a small portion of BRI-related investment, as defined in this paper.

There is very sparse information on the financing of BRI-related projects. A full debt sustainability analysis and the analysis of fiscal risks would require detailed, country-specific information on the financing structure of BRI-related projects. According to the WIND data base, about half of the BRI investment is in electricity and 1⁄4 in transport and shipping (see Annex II). Information from Pakistan suggests that electricity investments would be conducted by Independent Power Producers (IPP). These contracts usually include public sector guarantees on loan financing and a power purchasing agreement by government entities (e.g. the Ministry of Water and Power). Infrastructure contracts in Djibouti and Pakistan are either direct lending from China to the government or to a state-owned enterprise (SOE), with explicit guarantees of the government. In both contractual structures, the BRI-recipient governments are likely to guarantee a substantial amount of the private or public financing provided. It seems therefore reasonable to assume that a large share of the BRI investment would be financed as public or publicly guaranteed debt (PPG).<sup>11</sup> Country analysis suggests that PPG debt financing would amount to about 40 percent of the investment in power, electricity and mining and 80 percent in transport and other sectors. These assumptions result in PPG debt financing which amounts to around 60 percent of total BRI Investment costs, with the remainder project financing being provided as equity, grants or private non-guaranteed debt.<sup>12</sup> Given the structure of the investments described above, the incurred debt would be either public debt borrowed by a government ministry or debt guaranteed by the government or debt borrowed by an SOE or other government agency, with an implicit government guarantee. Consequently, we assume that all nonguaranteed SOE debt is PPG debt.<sup>13</sup>

> 9 <u>https://www.aiddata.org</u>

> 10 - <u>http://www.sais cari.org/data</u>

> 11 Also, private non-guaranteed debt financing would also be collateralized to the underlying asset or to other assets or identified revenue and could constitute fiscal risks from lower future revenue.

> 12 Costs include only the cost of construction of the infrastructure but exclude cost of maintenance, which could represent additional fiscal costs or fiscal risks.

> 13 Under the joint Bank-Fund Debt Sustainability Framework for Low-income countries, debt of a public enterprise can be excluded from the coverage of PPG debt if the enterprise poses limited fiscal risk, i.e., it is able to borrow without a guarantee from the government, does not carry out uncompensated quasi-fiscal activities, and has an established track record of positive operating balances (IMF and World Bank, 2018b).

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