China's debt is driving world's poorest country to collapse

A dozen poor countries are facing economic instability and collapsing under the weight of hundreds of billions of dollars in foreign debt, mostly from the largest governments and without China's forgiveness.

An Associated Press review of more than a dozen countries heavily indebted to China — including Pakistan, Kenya, Zambia, Laos and Mongolia — finds that debt service payments exceed tax revenues needed to keep schools open and provide electricity income. and the cost of food and fuel. It is depleting the small amount of foreign currency that these countries use to repay these loans, leaving months of money to run out.

Behind the protests is China's failure to write off its debts and its secrecy about the amounts and terms of what is owed, which has prevented other major creditors from stepping in to help. On top of that, the recent discovery that borrowers must invest in secret escrow accounts pushed China to the top of the debt list. Of the 4,444 4,444 countries analyzed by the Associated Press, 50 percent of their foreign debt comes from China, and most countries spend more than one-third of their national income on foreign debt repayments. Two of them, Zambia and Sri Lanka, have been unable to pay the profits from building ports, mines and power plants.

In Pakistan, millions of textile workers have lost their jobs as the country is too indebted to maintain electricity and machinery.

In Kenya, the government has returned checks to thousands of government employees to save on foreign debt payments. The president's top economic adviser wrote last month, "To pay or not to change? choose.

Since Sri Lanka was formed last year, half a million industrial jobs have been lost, inflation has risen above 50%, and more than half the population in many parts of the country has been pushed into poverty.

Experts warn that China won't start easing

"The clocks have struck midnight in many countries," says Ken Rogoff, a Harvard economist. Over the past two decades, China's state-owned banks have borrowed billions of dollars to build dams, railroads and roads

These loans boosted Zambia's economy and raised foreign interest rates to the point where the government was indebted, forcing the government to cut health, social services and subsidize farmers' purchases of seeds and fertilizers.

In the past in this situation, major creditors such as the United States, Japan, France, etc. have signed agreements to write off certain debts, and each creditor is transparent about what his figure is, and they think they have been cheated.

But China is not following these rules. At first, he refused to participate in several negotiations, including a special one with Zambia, and insisted on state secrecy, not revealing to non-Chinese parties the funds he borrowed, while China went one step further in the disbursement process. .

Amid the uproar in 2020, a group of non-Chinese banks rejected Zambia's request to freeze rates, even for months. The opposition has led to further depletion of Zambia's foreign exchange reserves, with large amounts of dollars being used to pay interest on loans and buy key commodities such as oil. As of November 2020, with so little left, Zambia defaulted on interest, depressing future lending and setting the stage for low and deep poverty.

Inflation in Zambia has risen by 50%, unemployment is at a 17-year high and the country's currency, the kwacha, has lost 30% of its value in just seven months. The United Nations estimates that the number of Zambians without food has nearly tripled this year to 3.5 million.

"I'm sitting at home wondering what to eat because I don't have money for food," said Marvis Kunda, a 70-year-old widow from Zambia's Luapula district, whose salary has been cut. “Sometimes I only eat once a day, and if someone nearby doesn’t remember to get me food, I’m going to starve.” double that of the country's total debt.

"We're running blind," says Brad Parks, director of AidData at the William & Research Laboratory. It was Marie who exposed China's secretive finances and helped the Associated Press investigate. "When you look under the sofa legs, you realize, 'Oh, we lost a lot. And it's getting worse.'" As the IMF has urged the IMF and World Bank to do. , many countries became vulnerable to interest payments, which stunted economic growth and helped them service their debts. Without aid, we have only a few months to pay for food, fuel and other essentials from abroad. Mongolia still has eight months to go. Pakistan and Ethiopia follow closely behind.

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