Tidal Wave of Debt: Poorest Nations Face Record $22bn Repayments to China

Tidal Wave of Debt: Poorest Nations Face Record $22bn Repayments to China

A new report has warned that the poorest 75 nations on Earth are facing a “tidal wave” of debt repayments to China, with a record $22 billion due in 2025. The analysis by the Lowy Institute, an Australian foreign policy thinktank, reveals that these countries are struggling to repay loans issued under China’s Belt and Road Initiative (BRI).

Debt Repayment Pressure

The report states that the pressure to repay these debts is putting a strain on local funding for essential services such as health, education, and climate change mitigation. “China’s lending has collapsed exactly when it is needed most, instead creating large net financial outflows when countries are already under intense economic pressure,” the report notes.

Belt and Road Initiative

The BRI, launched under President Xi Jinping, is a state-backed global infrastructure investment program that has underwritten national projects in developing nations. While China’s lending has helped finance crucial infrastructure projects, it has also raised concerns about Chinese influence and control.

Debt Trap Concerns

The practice has drawn accusations that Beijing is seeking to entrap recipient nations with unserviceable debt. Last month, another analysis by the Lowy Institute found that Laos was trapped in a severe debt crisis, partly due to over-investment in the domestic energy sector, mostly financed by China.

China’s Response

China’s government denies accusations of deliberately creating debt traps, while recipient nations have pushed back, saying China is a more reliable partner that offers crucial loans when others refuse. However, the Lowy report suggests that the record high debt now due to China could be used for “political leverage.”

Key Points:

Record Debt Repayments: Poorest 75 nations face record $22 billion debt repayments to China in 2025.
Belt and Road Initiative: Loans were largely issued under China’s BRI program.
Debt Trap Concerns: Concerns raised about Chinese influence and control over recipient nations.
China’s Response: China denies accusations of deliberately creating debt traps.

The report highlights the complex dynamics at play in China’s lending practices and the challenges faced by vulnerable nations in repaying these debts. As the situation unfolds, it remains to be seen how China will balance its diplomatic pressure to restructure unsustainable debt with domestic pressure to recall loans amid its own economic downturn.

Source: Africa Publicity