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Friday June 14th, 2024

China’s $240 bln lending for 22 countries opaque, expensive, only for BRI nations – study

ECONOMYNEXT – China has lent $240 billion worth of loans for 22 developing nations including Sri Lanka between 2008 to 2021 to rescue crisis hit nations as debts and balance of payment support, but the lending is expensive and less clear while it has targeted countries in Beijing’s Belt and Road Initiative (BRI), a report by four experts said.

Beijing has given over $170 billion for distressed nations and $70 billion as balance of payments support for the 22 countries mostly involved with Beijing’s ambitious Belt and Road Initiative (BRI) project, the report co-authored by Sebastian Horn from the World Bank, Bradley C. Parks from AidData of William & Mary, Carmen M. Reinhart from Harvard Kennedy School, and Christoph Trebesch from Kiel Institute for the World Economy.

The report comes amid increasing Western allegations that China is using its lending as a debt trap with an agenda to own assets in developing nations.

“However, China’s rescue loans differ from those of established international lenders of last resort in that they are opaque, carry relatively high interest rates, and are almost exclusively targeted to debtors of China’s Belt and Road Initiative,” the experts said.

“What is less well understood and of more recent vintage is the large and rising number of Chinese bailouts to countries in distress over the past 15 years. This paper shows that the Chinese government has created a new system of international rescue lending, which has not yet been documented or studied.”

The Belt and Road Initiative, known within China as the One Belt One Road or OBOR, was initiated in 2013 as a global infrastructure development strategy adopted by President Xi Jinping’s ambitious project to invest in more than 150 countries and international organizations.

“China’s role as an international crisis manager has grown exponentially in recent years following its long boom in overseas lending,” the experts said in the report.

“Our findings have major implications for the evolution of the international financial system, as cross-border rescue operations become less institutionalized, less transparent, and more piecemeal.”

“China has demonstrated that a major creditor country (notwithstanding its current status as an emerging market) can create a large system of cross-border rescue lending to nearly two dozen recipient countries, while at the same time keeping its bailout operations largely out of public sight.”

Findings from the study indicate that 80 percent of the bailout money was spent between the years 2016 to 2021, in middle-income countries like Pakistan, Argentina, and Mongolia.

The study also shows that China’s position is far from rivaling that of the United States or the IMF, which are at the center of today’s international financial and monetary system and the effectiveness of its rescue lending operations is not well understood.

While China has focused its sovereign debt restructuring efforts (with little or no new money) in low-income countries, its international bailout activities are concentrated in middle-income countries, the report said (Colombo/March30/2023)

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Sri Lanka opposition leader proposes Grama Rajya system in addition to 13A

Opposition leader Sajith Premadasa (r) – File photo

ECONOMYNEXT — Sri Lanka opposition leader Sajith Premadasa has proposed devolving power to the village level through a Grama Rajya system in addition to implementing the 13th amendment to the constitution.

Speaking at an event in Jaffna on on Wednesday June 12, Premadasa said all provinces will benefit from the 13th amendment.

“Whatever one’s ethnicity, religion, status or region, this country has citizens of equal level. They’re all Sri Lankan citizens.

“There is no division or grouping.  As we give you and every other province what you should be given through the 13th amendment, we must implement a Grama Rajya system,” Premadasa said, addressing a crowd of school children and other attendees.

Premadasa’s assurance of implementing the 13th amendment has already drawn some protest in the south.

A collective of civil society organisations held a protest outside the office of the leader of the opposition in Colombo on Thursday June 12.

Calling itself the ‘Coalition Against Partition of Sri Lanka’, the group carrying national flags marched up to the opposition leader’s office Thursday June 13 morning and demonstrated against the full implementation of the 13th amendment.

“We arrived here today to hand over a missive against devolving police powers, land powers and judicial powers. If Mr Premadasa is inside, come outside,” Jamuni Kamantha Thushara, Chairman of the Citizen’s Movement Against Fraud, Corruption, and Waste, was seen declaring at the site.

“First of all, tell us what we stand to achieve by dividing and giving away the north and east,” said another protestor, warning against bringing the 13th amendment “anywhere here (paththa palaathe)”.

A police officer at the scene the protestors that a secretary to the opposition leader was ready to accept their letter.

“In Kilonochchi, he says the 13th amendment will be implemented. The votes in the north are going to be decisive this election. To win those votes, President Ranil Wickremesinghe, Sajith and Anura Kumara Dissanayake all say they will implement the 13th. We will not allow this country to be divided into nine pieces,” said Thushara.

Ven Balangoda Kassapa Thero, who was arrested on June 06 during a protest against the new Electricity Act, was also seen at Thursday’s protest. The Buddhist monk requested for a debate with Premadasa on the matter of the 13th amendment. (Colombo/Jun12/2024)

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Sri Lanka rupee closes flat at 303.85/95 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed broadly flat at 303.85/95 to the US dollar on Thursday, from 303.80/304.00 to the dollar the previous day, dealers said. Bond yields were down.

A bond maturing on 15.12.2026 closed at 10.00/30 percent, down from 10.20/40 percent.

A bond maturing on 15.10.2027 closed at 10.60/75 percent.

A bond maturing on 01.07.2028 closed at 11.00/15 percent, down from 11.15/40 percent.

A bond maturing on 15.09.2029 closed at 11.80/85 percent.

A bond maturing on 15.05.2030 closed at 11.85/12.05 percent, down from 11.90/12.05 percent.

A bond maturing on 01.10.2032 closed stable at 11.95/12.15 percent. (Colombo/Jun13/2024)

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Sri Lanka sells Rs295bn in 2027 to 2031 bonds

ECONOMYNEXT – Sri Lanka has sold 295 billion rupees in 2027, 2029 and 2031 bonds, data from the state debt office showed.

The debt office sold an offered 60 billion rupees of 15 October 2027 at an average yield of 10.30 percent.

All offered 125 billion rupees of 15 September 2029 bonds were sold at 11.00 percent.

All 110 billion rupees offered of 01 December 2031 bonds were sold at 12.00 percent. (Colombo/May13/2024)

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