World

World’s poorest countries pushed to brink of collapse under China debt

Published

1 year ago

May 25, 2023

At least a dozen poor countries are buckling under the weight of hundreds of billions of dollars in debt, most of which is owed to China.

A recent analysis, carried out by the Associated Press, found that for a dozen countries, paying back their debt is consuming a growing amount of their tax revenue needed to keep basic services going.

Among the countries analyzed was Pakistan, Kenya, Zambia, Laos and Mongolia and it was found that paying back their debt is also draining foreign currency reserves that these countries use to pay interest on the loans - leaving some with just months before that money is gone.

AP reported that 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.

According to World Bank data analyzed by Statista recently, countries heavily in debt to China are mostly located in Africa, but can also be found in Central Asia, Southeast Asia and the Pacific.

And, Statista reports that the new Belt and Road Initiative, which finances the construction of port, rail and land infrastructure, has created much debt to China for participating countries, specifically poor countries.

As of March last year, 215 cooperation documents had been signed with 149 countries on the initiative.

Countries in AP’s analysis meanwhile 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, AP stated.

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.”

The study also found that since Sri Lanka defaulted a year ago, a half-million industrial jobs have vanished, inflation has risen by 50% and more than half the population in many parts of the country has fallen into poverty.

The study found that 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.

AP’s report stated that a case study of how it has played out is in Zambia, a landlocked country of 20 million people in southern Africa that over the past two decades has borrowed billions of dollars from Chinese state-owned banks to build dams, railways and roads.

While the loans boosted Zambia’s economy, they also raised foreign interest payments so high that there was little left for the government, forcing it to cut spending on healthcare, social services and subsidies to farmers for seed and fertilizer.

In the past under such circumstances, big government lenders such as the U.S., Japan and France would work out deals to forgive some debt, with each lender disclosing clearly what they were owed and on what terms so no one would feel cheated.

But China didn’t play by those rules, AP reported. It refused at first to even join in multinational talks, negotiating separately with Zambia and insisting on confidentiality that barred the country from telling non-Chinese lenders the terms of the loans.

By late 2020, Zambia was unable to pay the interest and defaulted, setting off a cycle of spending cuts and deepening poverty.

Since then, inflation in Zambia has increased by 50%, unemployment has hit a 17-year high and the nation’s currency, the kwacha, has lost 30% of its value in just seven months. AP also found that 3.5 million Zambians are now not getting enough food.

AP reported that a few months after Zambia defaulted, researchers found that the country owed $6.6 billion to Chinese state-owned banks, double what many thought at the time and about a third of the country’s total debt.

China’s unwillingness however to take big losses on the hundreds of billions of dollars it is owed, as the International Monetary Fund and World Bank have urged, has left many countries on a treadmill of paying back interest, which stifles the economic growth that would help them pay off the debt.

For Pakistan, its foreign cash reserves have plunged more than 50%, according to AP’s analysis, while in nine of the 12 countries analyzed, foreign cash reserves have dropped on average of 25% in just one year.

Based on this, Pakistan for example has only two months left of foreign cash to pay for food, fuel and other essential imports if it does not get a bailout. Other countries, such as Mongolia, have eight months left.

AP found that last month, Pakistan was so desperate to prevent more blackouts that it struck a deal to buy discounted oil from Russia, breaking ranks with the US-led effort to shut off Vladimir Putin’s funds.

In Sri Lanka, rioters poured into the streets last July, setting homes of government ministers aflame and storming the presidential palace, sending the leader tied to onerous deals with China fleeing the country.

China has however disputed the idea that Beijing is an unforgiving lender and said in a statement that the Federal Reserve was to blame.

It said that if it is to accede to IMF and World Bank demands to forgive a portion of its loans, so should multilateral lenders, which it views as US proxies.

“We call on these institutions to actively participate in relevant actions in accordance with the principle of ‘joint action, fair burden’ and make greater contributions to help developing countries tide over the difficulties,” the statement said.

But China’s approach to lending is widely considered more transactional and criticized as “opaque” and analysts see Beijing’s desire to access oil, minerals and other commodities as the driving force behind Chinese lenders being less prone to applying strict conditions in helping governments finance roads, bridges and railroads - so as to unlock those resources.

Just last month, US Treasury Secretary Janet Yellen told lawmakers: “I’m very, very concerned about some of the activities that China engages in globally, investing in countries in ways that leave them trapped in debt and don’t promote economic development.”

“We are working very hard to counter that influence in all of the international institutions that we participate in,” she said.

Since 2017, China has become the world’s largest official creditor, surpassing the World Bank, IMF and 22-member Paris Club combined, Brent Neiman, a counselor to Yellen, said late last year.

Politico meanwhile reported earlier this month that China’s financing of projects in other countries between 2000 and 2017 totaled more than $800 billion, most of that in the form of loans.

But for some poor countries struggling to repay China, they now find themselves stuck in a kind of loan limbo: China won’t budge in taking losses, and the IMF won’t offer low-interest loans if the money is just going to pay interest on Chinese debt.

Up Next

Four dead, suspect arrested in rare shooting in Japan

Don't Miss

Saudi embrace of Assad sends strong signal to US

World

US states worried about election unrest take security precautions

Many of the most visible moves can be seen in the battleground states that will decide the presidential election, states like Nevada where protests by Trump supporters broke out after the 2020 election

Published

3 hours ago

November 5, 2024

Ariana News

As a tense America votes on Tuesday for either Republican Donald Trump or Democratic Vice President Kamala Harris for president, concerns about potential political violence have prompted officials to take a variety of measures to bolster security during and after Election Day.

This year, a security fence rings the scene of some of those protests - the Las Vegas tabulation center.

A defense official said on Monday that Alabama, Arizona, Delaware, Iowa, Illinois, North Carolina, New Mexico, Oregon, Wisconsin and Washington state have current National Guard missions while Washington DC, Colorado, Florida, Hawaii, Nevada, Oregon, Pennsylvania, Tennessee, Texas and West Virginia have troops on standby.

In Arizona, a similar metal fence has been erected at Maricopa County vote tabulation center in downtown Phoenix, a flashpoint in 2020 for rigged election conspiracy theories and threats against election officials.

County Sheriff Russ Skinner said his department will be on "high alert" for threats and violence and he has instructed staff to be available for duty.

"We will have a lot of resources out there, a lot of staff, a lot of equipment," he added, noting deputies will use drones to monitor activity around polling places and snipers and other reinforcements will be on standby for deployment if violence appears likely.

He said "polarization" becomes more intense in the days after the election so law enforcement will remain on heightened alert and "there will be zero tolerance on anything related to criminal activity".

Concerned about the potential for protests or even violence, several Arizona schools and churches that served as voting centers in the past will not serve as polling stations this year, a local election official told Reuters.

Precautions stretch beyond the battleground states. Oregon and Washington state authorities have said they have activated the National Guard. Some storefront windows in Washington, DC and elsewhere have been covered by plywood.

Back in Las Vegas, Faviola Garibay surveyed the security fence around the linen-colored building where Clark County officials tabulate the votes and where voters such as her can drop election ballots.

"The fencing, the presence of police here, it seems secure," she said. "I feel safe voting."

World

Israeli airstrikes kill at least 31 people in Gaza, medics say

Hamas has repeatedly denied using civilian facilities such as hospitals, schools, and mosques, for military purposes.

Published

23 hours ago

November 4, 2024

Ariana News

Israeli airstrikes killed at least 31 people in the Gaza Strip on Sunday, Palestinian medics said, with nearly half of the deaths in northern areas where the army has waged a month-long campaign it says is aimed at preventing Hamas from regrouping, Reuters reported.

Palestinians said the new aerial and ground offensives and forced evacuations were "ethnic cleansing" aimed at emptying two northern Gaza towns and a refugee camp of their population in order to create buffer zones. Israel denies this, saying it is fighting Hamas militants who launch attacks from there.

Medics said at least 13 Palestinians were killed in separate attacks on houses in Beit Lahiya town and Jabalia, the largest of the enclave's eight historic camps and the focus of the army's new offensive.

The rest were killed in separate Israeli airstrikes in Gaza City and in southern areas, including one in Khan Younis, which health officials said had killed eight people, including four children.

Later on Sunday, health officials at the Kamal Adwan Hospital near Beit Lahiya said the facility came under Israeli tank fire and that one child hospitalized at the hospital was critically wounded.

Hussam Abu Safiya, the hospital's director said the incident took place after a delegation from the World Health Organization visited the facility and evacuated some patients.

He said while evacuating the wounded was important, it was more important to dispatch specialized medical teams to north Gaza hospitals that have become overwhelmed by the number of casualties.

Abu Safiya said the tank fire hit the water supplies, the courtyard, and the neonatal intensive care unit.

COGAT, the Israeli army's Palestinian civilian affairs agency, said the explosion resulted from an explosive device planted by Palestinian militants and not an Israeli attack.

"The terrorist organizations continue to exploit civilian infrastructure, medical facilities, and international aid organizations for their terror activities," a COGAT statement said late on Sunday.

Hamas has repeatedly denied using civilian facilities such as hospitals, schools, and mosques, for military purposes.

On Saturday, the Israeli military sent a new army division to Jabalia to join two other operating battalions, a statement said. It said hundreds of Palestinian militants have been killed in the "battles" since the raid began on Oct. 5, read the report.

Meanwhile, COGAT said it facilitated the launch of the second round of a polio vaccination campaign in northern Gaza on Saturday and that 58,604 children have received a dose.

The Gaza health ministry said Israel's military offensive in northern Gaza was stopping them from vaccinating thousands of children in Jabalia, Beit Lahiya, and Beit Hanoun.

It said one clinic had come under Israeli fire while parents brought their children for the anti-polio dose on Saturday and that four children had been injured.

The head of the World Health Organization said in a statement the clinic incident took place despite a humanitarian pause agreed upon by the two warring parties, Israel and Hamas, to allow the vaccination campaign.

"A @WHO team was at the site just before. This attack, during a humanitarian pause, jeopardises the sanctity of health protection for children and may deter parents from bringing their children for vaccination," Director-General Tedros Adhanom Ghebreyesus said in a post on X on Saturday.

"These vital humanitarian-area-specific pauses must be absolutely respected. Ceasefire!" he said.

The Israeli military, which had no immediate comment on Tedros' remarks, said it was checking the report about the clinic.

A larger ceasefire that would end the war and see the release of Israeli and foreign hostages held captive in Gaza as well as Palestinians jailed by Israel remains remote due to disagreements between Hamas and Israel.

Hamas wants an agreement to end the war permanently, refusing recent offers for temporary truces, while Israeli Prime Minister Benjamin Netanyahu says war can only end when Hamas is eradicated, Reuters reported.

The war erupted after Hamas-led militants attacked Israel on Oct. 7, 2023, killing some 1,200 people and taking 251 hostages back to Gaza, according to Israeli tallies.

Israel's retaliatory offensives have killed more than 43,300 Palestinians and reduced most of Gaza to rubble.

World

Russia targets Kyiv in hours-long drone attack

Ukraine’s military reported on Saturday that air defences had destroyed 39 out of 71 Russian drones that had been launched, and that another 21 had been “locationally lost”.

Published

2 days ago

November 3, 2024

Ariana News

Russia unleashed its latest overnight drone strike on Ukraine, targeting the capital Kyiv in an attack that lasted into midday and wounded at least one person, city officials said on Saturday.

Debris from downed drones struck six city districts, wounding a police officer, damaging residential buildings and starting fires, according to city military administrator Serhiy Popko, Reuters reported.

"Another night. Another air-raid alert. Another drone attack. The armed forces of the Russian Federation attacked Kyiv again according to their old and familiar tactics," Popko wrote on social media.

All the drones aimed at Kyiv had been shot down, he said.

Ukrainian energy provider DTEK said a high-voltage line powering the capital and two distribution networks in the Kyiv region had been damaged.

DTEK said in a statement that electricity had mostly been restored and that repairs were underway.

Reuters correspondents reported hearing explosions in and around the city during an air-raid alert that lasted more than five hours. One drone was seen flying low over the city amid the din of automatic-weapons fire.

Ukraine's military reported on Saturday that air defences had destroyed 39 out of 71 Russian drones that had been launched, and that another 21 had been "locationally lost".

President Volodymyr Zelenskiy said strikes were also reported in the central Poltava and northeastern Sumy and Kharkiv regions, read the report.

"This year, we have faced the threat of 'Shahed' drones almost every night — sometimes in the morning, and even during the day," he wrote on social media, referring to the Iranian-made attack drones used by Russia.

Russian forces have carried out regular airstrikes on Ukrainian towns and cities behind the front lines of the war which began when Russia invaded its neighbour in February 2022.

Kyiv's military said on Friday that Moscow's forces had launched more than 2,000 drones at civilian and military targets across Ukraine in October alone.

Russia has denied aiming at civilians and said power facilities are legitimate targets when they are part of Ukrainian military infrastructure.