Debt owed by South Asian nations to China hits record levels
Pakistan’s total external debt stocks owed to China has surged from $7.6 billion in 2016 to $26.5 billion in 2022
Lanka’s total debt owed to China almost doubled from $4.6 billion to $8.8 billion. Bangladesh’s increased from $0.97 billion to $6 billion. Maldives’ increased from $0.3 billion to $1.2 billion. Nepal’s increased from $0.07 billion to $0.26 billion. Most of the debts owed to China are in the form of loans for infrastructure projects.
However, in recent years, China has cut back its overall lending due to two factors. According to the World Bank debt report, this is because China’s own economic position is not strong. And some of the countries it lent to are defaulting on their payments because the investments funded by China have not been nancially successful.
After months of food and fuel shortage, Sri Lanka defaulted on foreign debt in 2022. According to a Reuters story, Sri Lanka’s interest payments will form nearly 54% of the country’s revenue this year, whereas Pakistan’s share is even higher at around 57%. Bangladesh’s interest payments will be 31.5% of its revenue. And most of these nations owe a large share of bilateral debt to China.
shows the percentage share of bilateral external debt owed by select countries as of 2022 to China and other nations. The list includes all the countries listed in Chart 1 and also other South Asian countries which don’t owe debt or owe little debt to China. Pakistan owes over 72% of its external bilateral debt to China. For Maldives, the gure is 68%; Sri Lanka’s is 57%, Nepal’s is 27%, and Bangladesh’s is 24%. Countries other than those in South Asia also owe a majority of their bilateral debt to China, with Japan, Germany and France being a distant second.
Notably, China too, during high levels of economic expansion in the 1990s and 2000s, increasingly accumulated foreign debt from countries such as Japan, Germany and France But its external debt stocks have rapidly fallen in recent years due to repayments.