It is argued that China’s BRI has resulted in unsustainable debt for infrastructure deals in several countries across continents and it is a part of debt-trap diplomacy. Discuss.

Debt trap diplomacy refers to practices of giving loans and extending financial grants to developing and least developed countries at terms that make it unviable to pay back, thus forcing such countries to fall into debt traps.

Unsustainable debt for infrastructure deals:

  • Belt and Road Initiative of China
  • Iran-China 25-year trade deal
  • China’s string of pearls strategy
  • International North-south Transport corridor
  • Asia-African development projects

BRI and debt-trap diplomacy:

  • China has been taking up infrastructural development projects across countries that are in need of infrastructure financing. E.g Recent Montenegro crisis.
  • These loans are extended for unviable projects which makes it difficult for countries to pay them back on harsh terms.
  • Often in case of default, China takes control of various strategic points within these countries. E.g: Areas of Pamir knot in Tajikistan, Hambantota port in Srilanka, etc.
  • Such infrastructure financing is also at times aimed at targetting India’s projects and ties. E.g: India lost the Chahbahar port and Farzad gas block deals with Iran while China extended a 25-year trade deal with Iran.
  • Infrastructure deals of this kind also lead to an increase in hidden debt in the world economy and virtual domination of china over other countries.
  • Debt trap diplomacy of china has also been attacking various of India’s strategic concerns. E.g: BRI project through POK.

Alternatives available for sustainable financing:

  • Instead of unequal bilateral financing, countries should shift their focus towards getting access to multilateral banks’ finance, e.g- ADB, WB, AIIB, NDB, etc.
  • Blue Dot Network and Paris Club for infrastructure finances should come up with a more affordable & accessible finance model.
  • The focus should be on capacity building instead of the distribution of freebies when it comes to infrastructure projects.

In the current scenario where there exists a heavy focus on multilateralism and free trade agreements, countries of the world need to remain conscious of debt-trap diplomacy taken up by China and others in the name of financing.

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