Developing countries warned against China loans for projects

DHAKA: Bangladesh’s finance minister has warned developing countries to think twice about taking loans through China’s Belt and Road Initiative as global inflation and slowing growth add to the strains on emerging markets.
 
AHM Mustafa Kamal also said China needed to be more rigorous in evaluating its loans amid concern that bad lending decisions risked pushing countries into debt distress. He pointed to Sri Lanka, where Beijing backed infrastructure projects that failed to generate returns had exacerbated an economic crisis.
“Whatever the situation [that] is going on worldwide, everybody will be thinking twice to agree to [BRI loans],” he said. “Everybody is blaming China. China cannot disagree. It is their responsibility.”
 
He said Sri Lanka’s crisis highlighted that China had not been rigorous enough in deciding which projects to support. It needed to “make a thorough study” before lending to a project, he said. “After Sri Lanka . . . we felt that Chinese authorities are not taking care of this particular aspect, which is very, very important.”
 
Bangladesh last month became the latest country in Asia to approach the IMF for financing as surging commodity prices after Russia’s invasion of Ukraine weighed on its foreign reserves. The country, a participant in China’s BRI, owes about $4 bn, or 6 per cent of its foreign debt, to Beijing.
 
Kamal said Bangladesh wanted a first instalment from the IMF of $1.5 bn as part of a $4.5 bn package, which would include financing to help it fund climate change resilience projects and buttress its budget. The fund said a loan to Bangladesh had not yet been negotiated.
 
Bangladesh was also seeking up to $4bn from other multilateral and bilateral lenders, including the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank and Japan International Cooperation Agency, Kamal said. He was optimistic the country would secure loans from them.
Kamal’s comments came after Wang Yi, China’s foreign minister, visited Bangladesh, meeting officials including Sheikh Hasina, prime minister. China called itself “Bangladesh’s most reliable long-term strategic partner” and said the pair agreed to strengthen “co-operation in infrastructure”.