China’s debt trap is gradually pushing some fragile countries into an economic crisis. Several days ago, as one of the victims, Bangladesh warned developing countries to think twice about securing loans from China’s Belt and Road Initiative (BRI).
According to U.S.-based media, Bangladeshi Prime Minister Sheikh Hasina met with Chinese Foreign Minister Wang Yi on Aug. 7.
In an interview with Bangladesh’s Financial Times on the sideline of the meeting, Bangladesh Finance Minister Mustafa Kamal said that the Chinese Communist Party should take responsibility for the debt it has caused to developing countries as a result of its BRI projects.
Kamal said: “Everyone is blaming China, and China can’t refute it, and it’s their responsibility.”
Kamal accused the CCP of not conducting rigorous research before advancing the Belt and Road Initiative, which has pushed some countries, such as Sri Lanka, into a debt crisis.
This year, the Sri Lankan government faced a catastrophe. Its foreign exchange reserves were depleted triggering a sharp rise in inflation, and the public has launched a massive revolt.
Pakistan is also in a serious economic crisis. Nepal also foresees an economic crisis, having banned the imports of cars and other luxury goods earlier this year due to falling foreign exchange reserves.
Last month, Bangladesh sought a $4.5 billion loan from the International Monetary Fund, becoming the latest Asian country to seek help from the international lender.
Laos also faces a high risk of default.
These countries all have one thing in common. They are all part of China’s Belt and Road Initiative.
Although experts have warned low- and middle-income countries for years not to engage in China’s debt diplomacy, they are all confused and trapped by the CCP’s huge investments.
Bangladesh owes China about $4 billion, or 6% of its total external debt.
Bangladesh’s currency has plummeted against the dollar in recent months as the government was forced to adopt strict austerity measures. Bangladesh has made it clear to the CCP that it is only willing to accept grants from Beijing and not any more loans.
Nepal has expressed the same view.
For Laos, the World Bank released a report in April, estimating that Laos’s total public debt and publicly guaranteed debt reached 88% of its GDP by 2021. The debt was worth $14.5 billion, about half of which were China loans to finance projects, including the China-Laos Railway.
A $4.7 billion railway project in Kenya has proven to be a huge failure, with 90% of the project funded by loans from the Export-Import Bank of China.
Kenyan Vice President William Ruto acknowledged earlier this year that his country’s total public debt was $73.5 billion as of March, while the country’s gross domestic product (GDP) was just over $100 billion.
Ruto said they are hurting from paying off the debt to the CCP.