China’s belt and road plan is a major debt risk for weak economies, report says
Beijing should make programme more multilateral, involve development bodies like the World Bank, US researchers say
China’s “Belt and Road Initiative” creates the potential for debt-sustainability problems in some of the world’s weakest economies, according to the Centre for Global Development.
The infrastructure project – aimed at forging new economic links with Europe, Asia and Africa – puts Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan “at particular risk of debt distress”, researchers at the Washington-based research institute said in a report on Sunday.
“Belt and road provides something that countries desperately want – financing for infrastructure,” co-author John Hurley, a visiting policy fellow on leave from the United States Treasury Department, said in a statement with the report.
“But when it comes to this type of lending, there can be too much of a good thing.”
Financing comes in various forms, including from dedicated institutions such as the Silk Road Fund, the Asian Infrastructure Investment Bank and the National Pension Fund. State-owned banks have lent billions of dollars to hundreds of projects in countries where most investors fear to tread.