China continues to trap a dozen poor countries into debt. As a result, these countries are facing economic instability and even collapsing under the weight of hundreds of billions of dollars in foreign loans. According to media (AP) report, a dozen countries most indebted to China — including Pakistan, Kenya, Laos, Zambia and Mongolia — found paying back that debt is consuming an ever-greater amount of the tax revenue needed to keep schools open, pay for food, provide electricity and fuel. The Chinese debt is draining foreign currency reserves of these countries as they use to pay interest on those loans. Interestingly, China seems to be ruthless to forgive these debts.
Zambia and Sri Lanka, have already defaulted and unable to make even interest payments on loans financing the construction of ports, power plants, and mines. In Pakistan, millions of textile workers have been laid off as country has too much foreign debt and are unable to afford to keep the electricity on and machines running.
In Kenya, the government has held back paychecks to thousands of workers to save cash to pay foreign debt. The president’s chief economic adviser tweeted last month, “Salaries or default? Take your pick.” Since Sri Lanka defaulted a year ago, a half-million industrial jobs have vanished, inflation has pierced 50 per cent and more than half the population in many parts of the country has fallen into poverty.
Notably, China has invested USD 843 billion in around 165 countries in 13,427 infrastructure projects, financed by more than 300 Chinese government institutions and state-owned entities, a number of poor countries have been saddled with ‘hidden debt’ worth USD 385 billion, a US-based research lab AidData said on September 29, 2021. Notably, China levies a 4.2 per cent interest rate and the repayment period is less than ten years. Also, its lending activities are shrouded in secrecy. Moreover, the level of debt exposure to China of 45 countries now is higher than 10 per cent of their national GDP.
Pakistan owes USD 77.3 billion of external debt to China and Sri Lanka at USD 6.8 billion. According to ‘The American business magazine’, 97 countries across the globe are in Chinese debt. Moreover, the world’s low-income countries owed 37 per cent of their debt to China in 2022. These countries are mostly located in Africa (Angola owes USD 36.3 billion, Ethiopia USD 7.9 billion and Kenya USD 7.4 billion), but they can also be found in Central Asia, southeast Asia and the Pacific.
