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Asian Development Bank Warns 8 Nations Against Chinese Debt Trap via BRI Project

Which countries are most vulnerable to Chinese Debt Trap via BRI Project according to the ADB (Asian Development Bank)? The head of the Asian Development Bank cautioned nations against unsustainable funding to finance infrastructure projects via the BRI Project, which could get them badly trapped under the Chinese debt.

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The President of Asian Development Bank – Takehiko Nakao said that China’s Belt and Road Initiative (BRI) is an important initiative to connect different regions which widens integration and collaboration across Asia, but warned small countries against unreasonable financing for infrastructure projects.

“If countries borrow too much for infrastructure projects without seriously looking at its viability, it will bring more difficulity in repayment. – Takehiko Nakao

Nakao echoed the anxieties of International Monetary Fund Managing Director Christine Lagarde over unreliable fiscal policies. Lagarde, in a conference in China, stated that the BRI initiative could put a massive burden on countries already overwhelmed with public debt.

“In nations where public debt is already large, rigorous management of funding terms is vital,” Lagarde said. “This will protect both China and the collaborating countries from signing agreements that will spell monetary hassles in the future.” China’s Belt and Road Initiative strives to build $8 trillion worth of infrastructure connecting China with trade routes between Asia and Europe.

According to the Center for Global Development, a Washington-based think tank mentioned in a report that 23 nations are at risk of debt distress due to the financing related to the Chinese BRI investment projects. Eight nations are of substantially at “high risk” which includes Pakistan, Maldives, Mongolia, Tajikistan, Kyrgyzstan and Laos.

“There are some small and underdeveloped nations, which face a significantly heightened danger of a sovereign debt default if BRI projects are completed in an expeditious manner and bankrolled with sovereign loans or guarantees,” the report said.

The Asian Development Bank predicts Asia’s infrastructure requirements could reach about $23 trillion by 2030, or $1.5 trillion yearly.

Must Read at EurAsian Times: High Risk for Companies Investing in One Belt One Road Projects (OBOR)?

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