Latest update April 26th, 2024 12:59 AM
Apr 30, 2019 News
By Kiana Wilburg
While China’s Belt and Road Initiative (BRI) has the potential to stimulate infrastructural development, Managing Director of the International Monetary Fund (IMF), Christine Lagarde says it should only go where it is needed and where countries can “sustainably” handle the debt that will follow.
Lagarde made these and other remarks to nearly 40 world leaders and other high-ranking officials at China’s second Belt and Road summit in Beijing. The three-day event ended on Saturday. The summit sought to encourage discussions on opportunities for growth that are possible for nations involved in the Belt and Road Initiative. There were also talks on ways to further promote trade, foster greater financial inclusion, and facilitate more people-to-people connections through BRI.
Lagarde’s presentation however, was focused on exposing that BRI is only successful in countries that need it and can subsequently service the debt that will be incurred.
The Managing Director said, “To borrow from a Chinese proverb, ‘It is easy to start a venture —the more difficult challenge is what comes next.’ That is where we find ourselves today, at the more difficult challenge. The BRI is clearly having an impact. From stimulating infrastructure investment to developing new global supply chains, some of the promises of BRI are being realized.”
Lagarde added, “Consider Kazakhstan, where a new manufacturing zone is beginning to unleash previously untapped economic potential. Or look at Senegal, where robust economic growth of over six percent in each of the last four years was supported partly by BRI-linked investment projects, including the construction of a new highway linking the airport to three large cities.”
At the same time, the IMF Managing Director alluded to the fact that other nations have not been so lucky. She said, “History has taught us that, if not managed carefully, infrastructure investments can lead to a problematic increase in debt. I have said before that, to be fully successful, the Belt and Road should only go where it is needed. I would add today that it should only go where it is sustainable, in all aspects…”
But this is not the first time Lagarde has warned about the debt risks that come with the BRI. Last year April, the Financial Times reported that the IMF Head cautioned Chinese policymakers about taking “unneeded and unsustainable” BRI projects in countries, which already heavy debt burdens.
She had told a similar conference in Beijing that while China’s Belt and Road Initiative could provide much-needed infrastructure, “ventures can also lead to a problematic increase in debt, potentially limiting other spending as debt service rises, and creating balance of payments challenges”. (See link for more on this: https://www.ft.com/content/8e6d98e2-3ded-11e8-b7e0-52972418fec4)
While Lagarde made such cautionary statements, she nonetheless praised China for its efforts to recalibrate its Belt and Road plan in the face of international pushback and criticism.
Locally, Kaieteur News has been at the forefront of exposing how the debt burden from China’s BRI has been breaking the backs of nations, which signed up for it.
Sri Lanka for example was forced to sign over its strategically important Hambantota Port to a Chinese state-owned company on a 99-year lease in 2017. The transfer of the port was to lift some of the enormous billion-dollar debts Sri Lanka owed to Beijing, debts which came from loans that helped fund Hambantota in the first place.
Other countries, which have landed in the same boat with Sri Lanka include Pakistan, Djibouti, the Maldives, Fiji and Malaysia. (See link for further details: https://www.kaieteurnewsonline.com/category/chinas-modus-operandi/).
In spite of the revelations made by this newspaper and the international reports warning countries about the BRI being nothing more than a debt trap, Guyana still signed up for it. Other Caribbean nations, which have done the same include Jamaica, Barbados, Venezuela, Costa Rica, Panama, Trinidad and Tobago, Dominica, and the Dominican Republic.
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