<
https://fortune.com/2023/05/18/china-belt-road-loans-pakistan-sri-lanka-africa-collapse-economic-instability/>
"A dozen poor countries are facing economic instability and even collapse under
the weight of hundreds of billions of dollars in foreign loans, much of them
from the world’s biggest and most unforgiving government lender, China.
An Associated Press analysis of a dozen countries most indebted to China —
including Pakistan, Kenya, Zambia, Laos and Mongolia — found paying back that
debt is consuming an ever-greater amount of the tax revenue needed to keep
schools open, provide electricity and pay for food and fuel. And it’s draining
foreign currency reserves these countries use to pay interest on those loans,
leaving some with just months before that money is gone.
Behind the scenes is China’s reluctance to forgive debt and its extreme secrecy
about how much money it has loaned and on what terms, which has kept other
major lenders from stepping in to help. On top of that is the recent discovery
that borrowers have been required to put cash in hidden escrow accounts that
push China to the front of the line of creditors to be paid.
Countries in AP’s analysis had as much as 50% of their foreign loans from China
and most were devoting more than a third of government revenue to paying off
foreign debt. Two of them, Zambia and Sri Lanka, have already gone into
default, unable to make even interest payments on loans financing the
construction of ports, mines and power plants.
In Pakistan, millions of textile workers have been laid off because the country
has too much foreign debt and can’t afford to keep the electricity on and
machines running.
In Kenya, the government has held back paychecks to thousands of civil service
workers to save cash to pay foreign loans. The president’s chief economic
adviser tweeted last month, “Salaries or default? Take your pick.”
Since Sri Lanka defaulted a year ago, a half-million industrial jobs have
vanished, inflation has pierced 50% and more than half the population in many
parts of the country has fallen into poverty.
Experts predict that unless China begins to soften its stance on its loans to
poor countries, there could be a wave of more defaults and political upheavals.
“In a lot of the world, the clock has hit midnight,” said Harvard economist Ken
Rogoff. “ China has moved in and left this geopolitical instability that could
have long-lasting effects.”"
Via Griff Ferrell and Christoph S.
Cheers,
*** Xanni ***
--
mailto:xanni@xanadu.net Andrew Pam
http://xanadu.com.au/ Chief Scientist, Xanadu
https://glasswings.com.au/ Partner, Glass Wings
https://sericyb.com.au/ Manager, Serious Cybernetics
