Three-fifths of the world’s developing countries are facing problems in repaying the vast sums of money they owe to China, one of the world’s largest single creditor nations, said an analyst.
As some developing countries fall behind on their debts, China stands the risk of never getting repaid the vast sums of money, columnist Federico Giuliani wrote in the InsideOver publication.
According to the analyst, over half the world’s poor countries owe more to China than to all Western governments combined, ANI reported.
Beijing has generously donated to some countries for their infrastructure projects like hydroelectric dams, airports and highways, making the country a lender of choice for many nations. However, the debt in countries such as Pakistan, Suriname and Kenya has grown massively.
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Giuliani said China provides loans to other countries at adjustable interest rates more than Western governments or multilateral institutions.
“However, with global interest rates rising swiftly, debt payments are soaring when nations can least afford to pay,” ANI quoted the analyst as saying.
Most of the countries that have taken loans from China realise that the money invested by Beijing generates jobs only for Chinese people. Even profits are booked mostly by Chinese enterprises, Giuliani said.
In the future, China will face problems as they will get a reduced return on debt, the analyst said.
In the past decade, China’s loans to lower and middle-income countries tripled from $40 billion in 2010 to $170 billion in 2020, BBC reported. However, the country is likely to have given more that the disclosed amount.
According to research by the international development body AidData, China does not report half of its lending to developing countries in official debt statistics.
These are often loans given to state-owned companies and banks, joint ventures or private institutions and not directly from the government to the government.
As a result of this hidden debt, there were over 40 low and middle-income countries whose debt exposure to Chinese lenders crossed 10 percent of the size of their annual economic output (GDP).
The debt of countries like Djibouti, Laos, Zambia and Kyrgyzstan is at least 20 percent of their annual GDP, the BBC report said.
(Edited by : Sudarsanan Mani)
