IMF's Lagarde warns China on 'Belt and Road' debt

13 Abril, 2018, 06:31 | Author: Gregg Anderson
  • Zhu Min former deputy managing director of the IMF warned of U.S. stock market risks at the Boao Forum for Asia

China's Belt and Road initiative should fill true infrastructure gaps and avoid financing deals that may lead to debt problems in partner countries, International Monetary Fund Managing Director Christine Lagarde said on Thursday.

China has been ramping up its Belt and Road initiative, which would build a modern-day Silk Road stretching from Asia to Africa and Europe.

"With any large-scale spending there is sometimes the temptation to take advantage of the project selection and bidding process. Experiences from across the globe show that there is always a risk of potentially failed projects and the misuse of funds".

Xi has touted the plan as a way to foster development and economic integration.

Lagarde's remarks follow recent concerns among the United States and its allies in Asia and Europe that China's new Silk Road project is aimed at expanding Beijing's economic, political and military influence overseas while making some countries heavily indebted to China.

But numerous colossal projects are being built by state-owned Chinese companies and financed by loans from China, leaving states billions of dollars in debt to Beijing.

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China's plan for a modern Silk Road of railways, ports and other facilities linking Asia with Europe hit a $14 billion pothole in Pakistan when plans for the Diamer-Bhasha Dam were thrown into turmoil in November past year, when the chairman of Pakistan's water authority said Beijing wanted an ownership stake in the hydropower project.

In countries where public debt is already high, careful management of financing terms is critical, in order to protect China and partner governments from entering into pacts that will cause financial difficulties in the future, Lagarde warned. In Sri Lanka's case, the island nation handed over a long-term lease on the strategically located and bustling Hambantota Port to pay down debt.

US Treasury Secretary Steven Mnuchin has expressed Washington's concern recently about Chinese Belt and Road development lending. "We're concerned in certain areas where countries can't necessarily afford the loans".

She urged China to improve the transparency of its decision making on the project, such as by creating a "one-stop shop" that provides information to stakeholders. "[The Belt and Road initiative] is neither the Marshall Plan after World War II nor an intrigue of China".

Xi struck back at criticism of his key initiative on Wednesday at the Boao Forum for Asia, a Davos-like meeting of global leaders held on the southern island of Hainan.

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