at the beginning of last month The administrators of the United States Agency for International Development (USAID) told members of Congress that Washington is stepping up efforts to help developing countries struggling with debt problems, and says China is part of the problem.
During a briefing to the House of Representatives Committee on International Affairs, USAID Administrator Samantha Power said, “China’s global lending spree has made it the world’s largest debt collector. Gone
Power said in an April 10 presentation to Congress that “for every $1 of aid (China) provides to middle- and low-income countries, China has created $9 worth of debt,” he said. “And this is in stark contrast to the reality of the United States… where for every $1 of debt we create, We have provided at least $9 worth of assistance.”
China’s International Development and Cooperation Agency has denied the accusations. It is baseless.
Lin Ming, a spokesperson for the agency, said on April 18 that “no country is in debt trouble because of cooperation with China.”
That’s false.
There are at least 2 countries which are Zambia and Sri Lanka Many of the countries that have defaulted on their payments and declared bankruptcy are mainly due to their inability to pay interest on large loans owed to China. Meanwhile, there are about 12 developing countries that owe a high proportion of their debt to China. more than 10% of its GDP
For the 12 countries heavily indebted to China, repayments “use huge amounts of tax revenue that should be used to keep schools open. provide electricity and pay for food and fuel,” according to the AP news agency.
China became the world’s largest bilateral contract lender in 2017, and what sets China’s debt apart from debt from other countries is that the loans are not private sector. But it comes from the Chinese government. State-owned banks and various state-owned enterprises
China offers details similar to those of most commercial lenders. But there is a shorter loan term and a higher interest rate. For example, The World Bank and International Monetary Fund usually grant loans to developing countries with interest rates ranging from 0% to 1.5%, but China’s interest rates are usually 2% to 3%.
The Belt and Road Initiative (BRI), China’s world-class infrastructure project It plays an important role in creating this debt trap. And after 8 years since its launch (since 2013), China has increased the interest rate for maximum late payment of debts by three times, from the level previously charged at 3% during 2014-2017 to 8.7% during the period. 2018-2021, according to data from the Aid Data research lab at the University of William and Mary. in the state of virginia
Zambia has borrowed money from Chinese government banks over the past 20 years to renovate several dams. and the subway system and many roads as well. The funds have helped stimulate the economy of Lusaka. But it has also caused Zambia’s level of foreign interest payments to skyrocket. Until international reserves are depleted and the government has been forced to cut health and social services and subsidies.
At the end of 2020, Zambia declared bankruptcy. And after this announcement came out The country’s inflation rate has soared to 50%, unemployment has hit a 17-year high and the kwacha currency has depreciated 30% in seven months.
Data from the International Monetary Fund, at the end of 2022, indicated that Zambia owed nearly $16.8 billion in foreign debt, including $6 billion from China. Zambia owes $4.1 billion to China’s Export-Import Bank and a total of about $1.8 billion to other Chinese government agencies.
Zambia, which does not have a sea border, is ready to move beyond being “An example of failed economic development. from borrowing billions of dollars from creditors like China,” according to Zambian Finance Minister Situmbego Musokotwane in an interview with The Wall Street Journal.
Musokotwane also said that “the level of debt Zambia receives from China is significantly too high.”
Sri Lanka became the first country in the Asia-Pacific region to default on its debt in the 21st century.
On July 5, 2022, the Colombo government declared bankruptcy. due to being unable to pay the principal and interest on the loan And since then There are continuous power outages throughout the country, while food prices are soaring. And more than half of the country’s population is living in poverty.
China is Sri Lanka’s largest bilateral creditor. The country’s debt borrowed from China accounts for 43% of total foreign debt. As of September 2023, the second and third largest creditors are Japan (22%) and India (15%), respectively.
China has invested in several mega projects in Sri Lanka, including highways, international airports and ports, including Hambantota International Port and Mattala Rajapaksa International Airport. which received financial support from the Export-Import Bank of China is considered a white elephant project. which means It is a difficult project to maintain. Not making a profit and reselling is also difficult.
Hambantota International Port is a deep-sea port and was originally built as part of the 21st Century Silk Road and backed by China. But when Sri Lanka was unable to pay its debts Colombo’s government struck a deal with China in 2019 giving Beijing a 99-year lease of the port, and many analysts worry that Instead, the port may become an operational space for the Chinese navy.
https://twitter.com/XHNews/status/939753813115789312/The Chinese government called what happened at the port a “disaster.” “Another milepost along the Belt and Road.”
As for Mattala Rajapaksa International Airport, construction was completed in 2021 with mostly Chinese funding of $190 million out of a project budget of $209 million.
This project is considered a very grandiose project. With a large passenger terminal of 12,000 square meters, 12 check-in counters, two boarding and disembarkation gates, and a runway long enough to accommodate the largest commercial aircraft in use at the time. and the ability to accommodate 1 million passengers per year
But the problem is The airport has not been able to attract airlines to fly there. In 2018, all airlines decided the level of operations at what is now known as the airport. The world’s emptiest international airport is gone.
But despite having a history of failures as described above, Sri Lanka also approved Chinese state oil company Sinopec to build a $4.5 billion refinery at the Hambantota international port in late 2023. The project is considered a major investment. This is the worst that has happened in Sri Lanka since the economic crisis in 2022.
- Source: Polygraph Department, VOA
