Latest update June 2nd, 2023 12:49 AM
Sep 03, 2022 News
By Davina Bagot
As Guyana continues to ignore advice of financial institutions regarding “cheap loans” from Chinese lending institutions, the most recently released Quarterly Bank of Guyana Report has revealed that the country’s external debt is overtaken by money it borrowed from China.
In the BoG’s first quarter report, it was noted the China Exim Bank accounts for 39.5 percent of the country’s total external debt. Additionally, debt repayment to the China Exim Bank accounted for 82 percent of debt repayments to bilateral creditors. In the first three months of the year, US$10.6 million alone was paid to the Chinese lending institution, up by 1.4 percent. The increase, according to the Central Bank, was as a result of higher principal repayments during the review period.
Presently, Guyana’s total stock of public debt, which comprises both external and domestic debt stands at US$3.248 billion.
Trailing the China Exim Bank is the Inter-American Development Bank (IADB). According to Guyana’s first quarter report, loans to the IADB account for some 32.6 percent of the country’s total external debt service. The Bank of Guyana explained that, “Debt repayments to IADB, which accounts for 67.4 percent of debt repayments to multilateral creditors and 32.6 percent of total external debt service, increased by 7.3 percent to US$8.8 million as a result of higher principal repayments during the review period.”
Meanwhile, it was also noted that debt repayments to the Caribbean Development Bank (CDB) rose by 4.6 percent to US$3.0 million during the first quarter of 2022.
Overall, Central Bank indicated that debt service payments increased by 3.3 percent to US$26.9 million primarily on account of principal repayments to both multilateral and bilateral creditors.
Only two weeks ago, Kaieteur News had carried an article by China Macro Economy in which it was explained that new transparency demands from global financial institutions – aimed at preventing sovereign debt distress- are starting to have an impact on China-backed infrastructure projects under the Belt and Road Initiative.
As global interest rates rise and concern about developing world debt risk swirls, “sustainability” and “transparency” have become buzzwords at organisations like the International Monetary Fund (IMF) and World Bank.
“China is the largest single creditor to developing nations after the World Bank, according to a March report by the Green Finance and Development Centre at Fudan University in Shanghai. Sixty-eight of the world’s poorest nations will pay US$52.8 billion this year to service debts and more than a quarter of that will go to China. Despite its outsize role in development finance, China has drawn criticism – especially from the United States – for not offering enough transparency around its loans, which has helped fuel accusations of “debt trap diplomacy,” said Otaviano Canuto, senior fellow at the Morocco-based Policy Centre for the New South.
Only in November last year, it was reported that China ranks among the top three richest countries in the world, with available liquidity being doled out in the form of loans to the tune of trillions. The country has been on an aggressive campaign pursuing a global infrastructure agenda under the rubric of the Belt and Road Initiative.
Lauded when first announced just over a decade ago, several countries that latched onto millions in loans for large-scale infrastructural projects, have since been finding themselves in a predicament where they would end up having to forfeit state assets and in some cases sovereign land.
This is as a result of the terms and conditions attached to these loans, including the exclusion of specific international arbitration bodies such as the Paris Club. The latest victim at the time, Uganda, was unable to pay its debt to China for a US$207M loan from the Chinese Exim Bank it contracted back in November 2015.
The loan had a maturity period of 20 years including a seven-year grace period. According to International reports, the country was forced to sign an agreement to virtually surrender the new airport to the Chinese lenders.
That airport serves as the country’s only international airport for a nation with a population of some 46 million people and a US$37.4B economy.
Kaieteur News has highlighted how China has been targeting weak and/or corrupt governments to sign onto its initiative, signing away exorbitant loans for mega-infrastructural projects.
In 2018 alone, China acquired over 20 deepwater harbours and airports from several countries around the world.
The country was able to do so by lending those countries massive amounts of money, which they would be unable to repay within the stipulated period. The country is accused of leveraging these massive loans it holds over small states worldwide to snatch assets and increase its military footprint.
Developing countries from Pakistan to Djibouti, the Maldives to Fiji, all owe huge amounts to China. Already there are examples of defaulters being pressured into surrendering control of assets or allowing military bases on their land.
Uganda is not the only country to have suffered the fate of having to turn over its assets to the Chinese for defaulting on loans.
Sri Lanka is one such country that had to formally hand over the strategic port of Hambantota to China on a 99-year lease, in 2019, in a deal that government critics have said threatens the country’s sovereignty.
The state-controlled China Merchants Port Holdings Company signed a deal with the Sri Lanka Ports Authority to control a 70 percent stake in the Hambantota port, which lies on the southern coast of the country.
Sri Lankan politicians said the Hambantota deal, valued at US$1.1 billion, was necessary to chip away at the debt, but analysts warned of the consequences of signing away too much control to China.
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