Adoba Echono, Abuja
According to a World Bank report, South Asian countries such as Sri Lanka, Pakistan, and the Maldives are engulfed in Chinese debt.
Pakistan owes China $77.3 billion in foreign exchange, while Maldives owe China 31 percent of its GDP (GNI). By the end of 2020, the Maldives’ total debt will be MVR 86 billion, with external debt accounting for MVR 44 billion.
According to a World Bank report from 2020, 97 countries around the world are in debt to China. Countries that owe China a lot of money are mostly in Africa, but they can also be found in Central Asia, Southeast Asia, and the Pacific.
One Belt and Road Initiative
China is reaching out to the majority of countries through the One Belt, One Road initiative.
The world’s low-income countries owe 37% of their debt to China in 2022, compared to just 24% in bilateral debt to the rest of the world.
The Chinese global project to finance the construction of the port, rail, and land infrastructure across the globe has been a major source of debt to China for participating countries.
Those with the highest external debt to China are Pakistan $77.3 billion, Angola 36.3 billion, Ethiopia $7.9 billion, Kenya $7.4 billion, and Sri Lanka $6.8 billion.
According to statistics released by the Finance Ministry, Maldives’ debt rose to MVR 99 billion by end of Q1 2022. It made up 113 percent of GDP.
The projects in the Maldives funded with loans from China include the construction of the Sinamale Bridge and the airport development project.
Bangladesh too is a part of China’s Belt and Road Initiative.
Dhaka owes 6 percent of its total foreign debt to Beijing, which is around $4 billion.
According to a report from FT, Bangladesh is seeking a first installment from the IMF of $1.5 billion, as part of a total package worth $4.5billion.
” This amount would include a financial line to help it fund climate change resilience projects and buttress its budget,” reads the report.
According to the IMF, Bangladesh had a total foreign debt of $62 billion in 2021. The majority of the debt is owed to multilateral lenders such as the World Bank.
Djibouti and Angola
The countries with the biggest debt burdens in relative terms were Djibouti and Angola, where debt to China exceeded 40% of gross national income, an indicator similar to GDP but also including income from overseas sources.
The equivalent of 30% of GNI or more in Chinese debt affects the Maldives and Laos, with the latter just having opened a railway line to China, which is already causing debt issues for the country.
In Sri Lanka in May 2022 was the first country in two decades to default on its sovereign debt. Chinese debt to Sri Lanka was the fifth-highest overall in late 2020 and amounted to 9% of the country’s GNI.
According to the Financial Times, which called the development in Sri Lanka and elsewhere China’s first overseas debt crisis, the country had to renegotiate loans worth $52 billion in 2020 and 2021—more than three times the amount that met this fate in the two previous years.
China has provided record amounts of financing to developing countries over the past two decades, supporting both public and private sector projects.
The Belt and Road Initiative is President Xi Jinping’s flagship foreign policy initiative; launched in 2013 to invest in almost 70 countries and international organizations, it has propelled China to global dominance in international development finance.
China’s Belt and Road Initiative has caused dozens of lower- and middle-income countries to accumulate $385 billion in “hidden debts” to Beijing, a new study has claimed.
AidData, an international development research lab based at Virginia’s College of William & Mary, says 13,427 Chinese development projects worth a combined $843 billion across 165 countries, over 18 years to the end of 2017.
China has faced criticism for its lending practices to poorer countries, accused of leaving them struggling to repay debts and therefore vulnerable to pressure from Beijing. China has rejected this criticism and calls it a “propaganda/narrative of the vested interested countries” to tarnish its image.