Belt and Road Initiative Countries Are in Payment Defaults

Countries with the Belt and Road Initiative in Asia are facing high inflation, large deficits, and a lack of foreign exchange. They turned to international institutions and creditor country China to avoid bankruptcy.

 On August 5th, the Bangladesh government announced it no longer continued to subsidize gasoline and raised the price of gasoline by 51% and that of diesel by 42%, sparking major protests. Bangladesh inflation exceeded 6% in the last fiscal year.

 Bangladesh’s foreign exchange reserves are at the lowest, while the trade deficit is growing. While the first country, Sri Lanka, is already in default of payment, the countries most at risk of a foreign debt default are Pakistan and Laos, and next come to Bangladesh and Burma. Pakistan has less than 10 billion dollars in foreign currency, only enough to import for six weeks.

 Earlier this month, the World Bank confirmed plans to provide $170 billion to help developing countries cope with the cumulative impact of multiple crises. The International Monetary Fund is in discussions with several countries and reached the first agreement with Pakistan in mid-July.

 China invested heavily in the region and lent to many countries that could not find financing elsewhere. But China’s interest rate is higher-than-market. Now several emerging countries, including Bangladesh, are calling for vigilance against Chinese funding.

 Borrowers called on China to renegotiate the debt, but the Chinese Communist Party (CCP) did not respond and remained silent. Experts warned that following Sri Lanka, there would be a contagion of payment defaults on the Asian continent.

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Translator: MOS Gospel Team
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