Why Defense Chief of Staff Bipin Rawat warned Nepal about China’s footprint
In a comment to China, the Chief of Defense Staff, General Bipin Rawat, this week advised Nepal not to sign loans from other countries in the region and urged Kathmandu to learn from the Sri Lankan experience that had signed agreements with “other countries in the region.” , a clear reference to Chinese financial institutions that have quietly provided billions of dollars in loans to developing countries that have been used to gain strategic leverage.
In his keynote address at an online event organized by a group of Nepalese experts, Gen Rawat underlined the deep and extensive ties between New Delhi and Kathmandu before noting that Nepal was opening up to other countries, including China, on the basis of of its independent foreign policy.
“Nepal is free to act independently in international affairs, but it must be vigilant and learn from Sri Lanka and other nations that have also signed agreements with other countries in the region,” said India’s top military official.
Sri Lanka is just one example. It had to hand over the port of Hambantota to China on a 99-year lease in 2017 after struggling to pay debts incurred for its construction by Chinese companies. The $ 3.3 billion outstanding debt to China is just one part of Lanka’s financial chaos compounded by borrowing from international markets by successive governments.
Lanka, however, is not alone. A senior Indian government official said China had made loans totaling at least $ 31 billion to five South Asian countries; Pakistan, Maldives, Bangladesh, Sri Lanka, and Nepal.
“These are the reported figures but the actual figure could be much higher,” the official said.
No one really knows the actual figures, as Chinese lenders prohibit governments from disclosing the figures. Zambia, the first African country to stop paying its debts since the pandemic, said: according to a report by The GuardianAsset and fund managers wanted transparency about their estimated $ 3 billion debt to Chinese lenders who had forbidden them to give details unless the recipients of this information sign confidentiality agreements.
Zambia has been hurtling into a debt debacle for months, even years. It has now become the first African nation to default on sovereign payments since the pandemic began.
A study published in the Harvard Business Review In February of this year, it is estimated that almost 50 percent of the loans granted by Chinese institutions were not reported. He concluded that the Chinese state and its subsidiaries have lent around $ 1.5 trillion in direct loans to more than 150 countries around the world.
This makes China the world’s largest official creditor, outperforming traditional official lenders like the World Bank, IMF or all OECD creditor governments combined, according to the study.
Add in portfolio debts and trade credits to purchase goods and services, and the aggregate claims of the Chinese government to the rest of the world exceed $ 5 trillion. That implies that countries around the world owe more than 6% of global GDP in debt to China as of 2017, he said.
In South Asia, however, it is not Sri Lanka but Pakistan and Bangladesh that have received the largest loans from China.
Bangladesh owes $ 4.7 billion to China and has requested an $ 18 billion loan on concessional and preferential terms to implement mega-projects. China promised $ 24 billion in loans a few years ago but, in July 2019, it disbursed only $ 981, according to the Diplomat website.
Pakistan is estimated to have already borrowed $ 22 billion for its megaprojects, including the China-Pakistan Economic Corridor, which Prime Minister Imran Khan had questioned before being elected to power. This week, Islamabad raised an additional $ 1 billion to pay off the second installment of a $ 3 billion soft loan. Next month, he hopes the third installment will pay Riyadh back.
For now, the State Bank of Pakistan downplays concerns around Chinese debt, insisting that the loan to CPEC is only $ 5.8 billion, which is just 5.3 percent of total external debt. of Pakistan of $ 110 billion.
The Maldives is concerned that the former Abdulla Yameen regime has dragged the Indian Ocean island chain into a debt trap. Former President Mohamed Nasheed, now Speaker of Parliament, announced that the Chinese debt bill was about $ 3.1 billion, including government-to-government loans, money given to state-owned companies, and private sector loans guaranteed by the government. Maldivian government.
Analysts said the Maldives could struggle to pay off Chinese loans for 2022-23 as the $ 4.9 billion economy was struggling due to falling tourism revenue.