Pakistan’s economic crisis is worsening. Sri Lanka also witnessed massive protests due to the crisis. Finally, even the government of the country changed. Sri Lanka became unsustainable as inflation soared, debt piled up and foreign reserves nearly depleted.
Another country in the Indian subcontinent, Nepal, is also facing an economic crisis. The country has banned the import of vehicles and luxury goods. The move comes as foreign reserves begin to dwindle. One of the reasons for the crisis of all these countries is that China’s BRI works closely with the global infrastructure development plan. About 70 countries of the world are cooperating with Beijing in this regard.
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Through the BRI, the Chinese government is providing financial assistance to other countries for the construction of ports, roads, bridges, dams, power stations and railway lines. According to the Organization for Economic Co-operation and Development (OECD), through the BRI development strategy, China is aiming for the cooperation of the six major economic corridors that comprise them. These economic corridors include Mongolia and Russia, Eurasian countries, Central and West Asia, Pakistan, other countries of the Indian subcontinent, and Indochina.
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China’s policies have already been blamed for the economic crisis in Sri Lanka and Pakistan. Economists have already warned developing countries not to fall for China’s ‘debt trap diplomacy’. China has provided billions of dollars in financial assistance for infrastructure development in Pakistan and Sri Lanka. Pakistan and Sri Lanka could not avoid using this debt. Finally, they have faced a big crisis.
Countries that have fallen victim to China’s ‘debt trap diplomacy’ are finally seeking help from the International Monetary Fund (IMF). Experts are now advising small countries to learn from the crisis in Sri Lanka and Pakistan. Sri Lanka’s economic base was completely destroyed. Experts advise that other countries in the region should exercise caution when borrowing from Chinese projects.
Professor of Economics Department of International University of Business Agriculture and Technology (IUBAT) Dr. Rasool said. The European Foundation for South Asian Studies (EFSAS) reports that foreign debt is making countries more vulnerable.
In his article in The Daily Observer, Mohammad Maruf Mojumdar points out that the world should take serious lessons from Sri Lanka. He said that Sri Lanka’s dependence on China over India has affected Sri Lanka in every way. China is trying to become a superpower in the world by providing small loans to developing countries with huge profits. The weaker countries of South Asia are now mainly caught in this trap. He also warned Bangladesh to be cautious in this regard.
Countries are becoming fascinated by China’s myths. China has not only exacerbated the debt crisis in countries like Sri Lanka and Pakistan. The projects that have been started are getting abandoned halfway. Experts also say that the unfinished projects worth billions of dollars are standing half-way.
“Many leaders who have come to power in Pakistan have been overly dependent on China instead of reforming and developing there themselves. They mistakenly thought that things would be easy if China followed the path. “The stupid policies of Nawaz Sharif, the brother of current prime minister Shehbaz Sharif, have made Pakistan a slave to China,” explained Michael Rubin, a senior fellow at the American Enterprise Institute, according to a report in The Times of India.
China’s next target is Bangladesh and Laos
Bangladesh Finance Minister AHM Mustafa Kamal recently warned developing countries against taking more loans through the BRI scheme. He pointed out that China-backed infrastructure development projects have led countries like Sri Lanka to crisis. “Everyone is blaming China. They cannot shirk this responsibility,” Kamal said in an interview to the Financial Times.
Laos, a South-East Asian nation, is becoming another victim of the debt crisis, experts say. The country has borrowed heavily from China for infrastructure development. This indebtedness is more likely to lead them to crisis as well. International rating agency Moody’s downgraded Laos’ credit rating to Caa3 in mid-June. The reasons behind this are high debt (foreign exchange) and low reserves.
According to a report published by the World Bank in April, preliminary estimates indicate that Laos’ total public debt will reach 88 percent of gross domestic product in 2021. Total debt is US$14.5 billion. About half of this is from China. According to figures, China has given huge aid to the development of railways in Laos.
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