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China-Debtor Nations

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According to Statista’s analysis of World Bank data, countries heavily in debt to China are mostly found in Africa, but they can also be found in Central Asia, Southeast Asia, and the Pacific. China, as the new preferred lender to low-income countries, held 37% of their debt in 2020. According to Statista, only 24% of the countries’ bilateral debt came from the rest of the world that year.

The “New Silk Road” project, which funds the construction of port, rail, and land infrastructure around the world, has left participating countries deeply in debt to China.

Pakistan (USD 27.4 billion in external debt to China), Angola (22.0 billion), Ethiopia (7.4 billion), Kenya (7.4 billion), and Sri Lanka (7.2 billion) had the highest debts to China at the end of 2021.

Djibouti and Angola had the highest relative debt burdens, followed by the Maldives and Laos, which opened a debt-laden railway line to China last year.

The World Bank’s President, David Malpass, has described the level of debt that many countries are now carrying as “unsustainable.”

The Paris Club used to hold the majority of low-income countries’ debt before it was restructured and largely forgiven for qualifying developing countries after the turn of the millennium. It is unclear whether such a procedure will be available for Chinese debt.

China had officially lent around USD 180 billion to low and middle-income countries as of 2021, up from around USD 40 billion in 2010. Chinese loans have higher interest rates than those from international institutions such as the International Monetary Fund or The World Bank, as well as shorter repayment terms than those from Paris Club countries. Their structure is more akin to commercial loans in terms of repayment terms, confidentiality, and funding specific infrastructure projects rather than pursuing development goals in general.

The Covid-19 pandemic has added to the already difficult repayment of Chinese loans. According to the Financial Times, the country will have to renegotiate loans worth USD 52 billion in 2020 and 2021, which is more than three times the amount that was renegotiated in the previous two years. Sri Lanka, another of China’s largest debtors, became the first Asian country in two decades to default on its debt in 2022.

Info source – Intellinews

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