The world’s collective debt is at a historic high. According to Fortunly’s infographic, China’s Belt and Road Initiative (BRI) is one of the biggest contributors to the global debt problem.
The superpower’s flagship foreign policy program, which was unveiled in 2013, aims to finance major development projects on several continents. Their goal is to create maritime and overland transportation links along strategic trade routes connecting vital parts of Asia, Africa, and Europe.
The planet’s second-largest economy is prepared to loan out trillions of dollars to the dozens of countries involved in the BRI, aka the New Silk Road. The East Asian nation dubs its initiative as a win-win solution to address the underdevelopment of a myriad of Third World countries.
Some nations and organizations, however, consider the BRI a disaster waiting to happen, especially to the participating states. Naysayers think of it as a weapon for China’s “debt-trap diplomacy” designed to convince vulnerable nations to gravitate toward the Chinese orbit of influence and away from the Western powers.
Sri Lanka: The First Domino to Fall
Notwithstanding criticisms hurled at it, the BRI brought rosy promises to its beneficiaries until Sri Lanka defaulted on its financial obligation in 2017. As a consequence, the South Asian country had to turn over the operation of its Hambantota maritime port to state-owned Chinese entities.
The news sent shock waves around the world. It proved critics right and gave China’s geopolitical rivals more ammunition to attack the integrity of the BRI.
Potentially Grim Fates for Eight
According to the Center for Global Development, eight more countries will likely face financial distress due to above-average debt after the issuance of BRI loans. These nations are Djibouti, Tajikistan, Kyrgyzstan, Laos, the Maldives, Mongolia, Pakistan, and Montenegro, whose debt-to-GDP ratios skyrocketed after receiving Chinese financing.
There are no tell-tale signs right now whether said countries will lose a national asset like Sri Lanka did due to enormous debt. Their governments, along with those of other nations involved in the BRI, though, have taken different measures to allay the fear of property seizure.
An Eye-Opener to All Parties
After Sri Lanka’s BRI aspiration folded, other countries have started to make moves to protect their sovereignty. Nepal and Pakistan, for example, scrapped certain large-scale projects while Malaysia successfully forced China to renegotiate unfair terms.
On the other hand, the Chinese government is expected to become more skittish moving forward to avoid future waves of worldwide backlash after it took over the strategic Sri Lankan port.
The BRI is neither good nor evil; rather, it can be a major threat to sovereignty or an instrumental tool for development. The reality is that the developing world has been crying for help, but China is just one of the few global powers willing to funnel massive amounts of money into infrastructure projects, which are long overdue, whereas Western nations are widely perceived to be busy funding regional wars.
Sri Lanka’s desperation for foreign financial assistance did not work well for its own sake, but at least it helped the rest of the BRI-included nations to see the worst-case scenario before they experience real debt distress themselves.
Infographic URL: https://fortunly.com/infographics/global-debt-history-infographic/