China Debt Trap
Highlights
- China implicated Pakistan-Sri Lanka in debt trap
- No relief was given to both of them from China.
- Foreign exchange reserves reduced due to debt
China Debt Trap: Pakistan is also fast moving closer to the economic crisis in which Sri Lanka is trapped. The country’s foreign exchange reserves have gone down. Due to which the International Monetary Fund (IMF) has put strict conditions in front of Pakistan before giving the relief package. Whether it is Sri Lanka or Pakistan, their evergreen friend China is responsible for this condition of both the countries. China told this lie to them that it will always think of their well-being and is working only for their well-being. While it was not so. For the past several years, experts have been warning low- and middle-income countries about China’s debt trap. But Sri Lanka and Pakistan did not listen to anyone.
This is the reason why China has been successful in getting projects worth billions of dollars in vulnerable countries like Sri Lanka and Pakistan under its ambitious project Belt and Road Initiative (BRI). The debt burden on Sri Lanka and Pakistan has increased so much that even international financial institutions are shying away from issuing relief packages.
China’s debt led both to bankruptcy
There are many reasons behind the economic crisis of Pakistan and Sri Lanka. For this, there is a big hand from the government to the corona virus epidemic. But there is no doubt that China’s debt has played an important role in sinking their boat. Of course, many countries including the US have condemned China’s BRI project. Despite this, Pakistan and Sri Lanka did not become aware. The US said that China is making developing countries dependent on itself through BRI. But China denies these allegations. He says that he provides the necessary budget to the developing countries.
Economic slave making money by showing lollipop
Not only are Pakistan and Sri Lanka trapped in a debt trap due to China’s hollow claims, but projects worth billions of dollars are also lying unfinished here. Poverty is increasing here so much that they are unable to even think of working on these billion dollar projects or paying off the debt. In such a situation, they are forced to take help from China at every step to save themselves. Michael Rubin, a senior fellow at the American Enterprise Institute, says that one leader after another in Pakistan is shying away from economic reforms. The reason behind this is that they still believe in the false stories of China. Instead of being an economic assistant of Pakistan, China has trapped this country in its net through the China-Pakistan Economic Corridor.
Like Pakistan, China has betrayed Sri Lanka through BRI. Most of these projects are gathering dust at the Hambantota port. This port is located in southern Sri Lanka near the east-west sea route. The construction of the port began in 2008, for which China lent about US$1.3 billion. Initially, China had shown dreams of developing this port to Sri Lanka. China said that this port is located on an important trade route passing through the Indian Ocean. But, Sri Lanka has not benefited at all from this port. This was the reason why the Sri Lankan government deliberately handed over the port to a Chinese company on a 99-year lease for fear of repaying the debt.
The amount of Hambantota is not even worth the electricity bill
Rajapakse Airport is near Hambantota port. It has been made with $200 million from China. The airport is rarely used. There were situations when it did not even have the money to pay its bills. Since then the airport is not in use. Chinese companies are now using the airport to their advantage, but are not giving any discount in the loan money. This is the reason why Sri Lanka’s foreign exchange reserves have become empty in the process of repaying China’s debt. Not only this, the corona virus epidemic and the political situation have also made Sri Lanka in such a bad condition.
Many projects of CPEC remained incomplete
Similarly, China has not yet completed many projects related to CPEC. According to the Government of Pakistan, many projects of CPEC have either not started or are running late. According to a report in May, only three out of 15 projects on Gwadar have been completed. According to the CPED authority, a dozen projects worth up to $2 billion, including water supply and power generation, are still unfinished.
The debt on Pakistan is increasing year after year
Whether the projects are incomplete or in limbo, China’s outstanding debt to Pakistan is increasing year after year. Documents released by Pakistan’s Ministry of Finance showed that Pakistan’s total publicly and publicly guaranteed foreign debt stood at $44.35 billion in June 2013, of which only 9.3 percent was owed to China. According to the IMF, by April 2021, this external debt had risen to $90.12 billion, with China’s debt to Pakistan accounting for 27.4 per cent of the total external debt. In fact, Pakistan needs to pay more than double the IMF dues to China over the next three years.
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