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On China’s New Silk Road, Democracy Pays A Toll (Foreign Policy)
May 16, 2018
From the article:
...To understand how the Belt and Road Initiative can threaten human rights and good governance, consider first how its projects are financed.To understand how the Belt and Road Initiative can threaten human rights and good governance, consider first how its projects are financed. Thus far, China has largely favored loans over grants. It is not a member of the Paris Club of major creditor nations, and it has shown little inclination to adhere to internationally recognized norms of debt sustainability, such as the sovereign lending principles issued by the United Nations Conference on Trade and Development. At the same time, many of the recipient countries participating in the project lack the capability to assess the long-term financial consequences of China’s loans — or they may simply accept them, assuming the bills will come due on a future government’s watch.
Ballooning, unsustainable debt is the predictable result. Sri Lanka, where in 2017 some 95 percent of government revenue went to debt repayment, represents the best-known example of Belt and Road’s negative impact on a country’s balance sheet. But Sri Lanka is only the most prominent case; a recent study by the Center for Global Development identified eight countries — Djibouti, the Maldives, Laos, Montenegro, Mongolia, Tajikistan, Kyrgyzstan, and Pakistan — that are at particular risk of debt distress due to future Belt and Road-related financing.