Nepal’s Prime Minister Khadga Prasad Sharma Oli is set to visit China, marking an important shift from the traditional first visit to India by newly appointed Nepali leaders. This decision is influenced by various factors, including Nepal’s ongoing struggles with Chinese-funded projects and the need for economic concessions from Beijing.
Background on Nepal-China Relations
Since the signing of the Belt and Road Initiative (BRI) agreement in 2017, Nepal has grappled with the implications of Chinese investments. The BRI aims to enhance infrastructure connectivity across Asia, yet many projects in Nepal have stalled or failed to deliver expected benefits. The Pokhara International Airport, financed by a substantial loan from China, exemplifies these challenges, becoming a financial burden rather than a boon for the country.
The Economic Implications of BRI Projects
Nepal’s economy, still recovering from the COVID-19 pandemic, is heavily reliant on foreign investments. The BRI projects, while promising, have often resulted in debt. The Pokhara airport, for instance, is mired in controversy due to inflated costs and high interest rates—five per cent compared to the lower rates offered by institutions like the IMF. This has raised alarms among political leaders who are wary of Nepal’s growing debt to China.
Political Dynamics in Nepal
Oli’s administration faces pressure from the Nepali Congress (NC), a key coalition partner, which demands that any BRI projects be funded through grants rather than loans. The NC’s stance reflects a broader concern about the sustainability of Nepal’s debt and the potential for economic dependency on China. This political tension complicates Oli’s attempts to push forward with BRI projects while maintaining coalition support.
The Upcoming Visit to China
During his visit, Oli aims to negotiate concessions from China, including a potential waiver of the Pokhara airport loan. This gesture could be very important in reshaping public perception of the BRI and demonstrating Oli’s commitment to national interests. However, there is skepticism regarding China’s willingness to comply with such requests, as it could set a precedent for other countries seeking similar concessions.
Challenges Ahead
Despite Oli’s hopes, the likelihood of China agreeing to his demands appears slim. Beijing has shown reluctance to alter the terms of existing loans, fearing it may encourage other nations to make similar requests. As a result, Oli’s visit may yield limited outcomes, reflecting the complexities of international relations and the strategic interests at play.
The Broader Context of BRI
The BRI has faced criticism globally, with numerous projects labelled as ‘white elephants.’ Countries like Sri Lanka have experienced similar issues, raising questions about the viability of Chinese investments. Nepal’s situation marks the need for careful consideration of foreign investments and their long-term impacts on national sovereignty and economic stability.
Questions for UPSC:
- Discuss the implications of the Belt and Road Initiative for Nepal’s economy.
- Analyse the political dynamics influencing Nepal’s foreign policy towards China and India.
- Examine the challenges faced by Nepal in managing its debt to China.
- Evaluate the role of the Nepali Congress in shaping the country’s approach to BRI projects.
- What lessons can be drawn from other countries’ experiences with Chinese investments under the BRI?
