Pakistan at top of list of countries China spent $240 billion bailing out — study

A Pakistani currency dealer counts Chinese currency for his customer at his shop in Quetta, Pakistan, on January 3, 2018. (AFP/File)
Short Url
Updated 28 March 2023
Follow

Pakistan at top of list of countries China spent $240 billion bailing out — study

  • China bailed out 22 countries between 2008 and 2021 struggling to repay “Belt & Road” infrastructure loans
  • Almost 80 percent of the rescue lending was made between 2016 and 2021, mainly to Argentina, Mongolia and Pakistan

JOHANNESBURG: China spent $240 billion bailing out 22 developing countries between 2008 and 2021, with the amount soaring in recent years as more have struggled to repay loans spent building “Belt & Road” infrastructure, according to a study published Tuesday.

Almost 80 percent of the rescue lending was made between 2016 and 2021, mainly to middle-income countries including Argentina, Mongolia and Pakistan, according to the report by researchers from the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy.

China has lent hundreds of billions of dollars to build infrastructure in developing countries, but lending has tailed off since 2016 as many projects have failed to pay the expected financial dividends.

“Beijing is ultimately trying to rescue its own banks. That’s why it has gotten into the risky business of international bailout lending,” said Carmen Reinhart, a former World Bank chief economist and one of the study’s authors.

Chinese loans to countries in debt distress soared from less than 5 percent of its overseas lending portfolio in 2010 to 60 percent in 2022, the study found.

Argentina received the most, with $111.8 billion, followed Pakistan on $48.5 billion and Egypt with $15.6 billion. Nine countries received less than $1 billion.

People’s Bank of China (PBOC) swap lines accounted for $170 billion of the rescue financing, including in Suriname, Sri Lanka and Egypt. Bridge loans or balance of payments support by Chinese state-owned banks was $70 billion. Rollovers of both kinds of loan were $140 billion.

The study was critical of some central banks potentially using the PBOC swap lines to artifically pump up their foreign exchange reserve figures.

China’s rescue lending is “opaque and uncoordinated,” said Brad Parks, one of the report’s authors, and director of AidData, a research lab at William & Mary College in the United States.

The bailout loans are mainly concentrated in the middle income countries that make up four-fifths of its lending, due to the risk they pose to Chinese banks’ balance sheets, whereas low income countries are offered grace periods and maturity extensions, the report said.

China is negotiating debt restructurings with countries including Zambia, Ghana and Sri Lanka and has been criticized for holding up the processes. In response, it has called on the World Bank and International Monetary Fund to also offer debt relief.


Pakistan’s Afghan salvo risks turning ‘open war’ into long crisis

Updated 3 sec ago
Follow

Pakistan’s Afghan salvo risks turning ‘open war’ into long crisis

  • Nuclear-armed Pakistan has a formidable military of 660,000 active personnel, backed by a fleet of 465 combat aircraft
  • But the Taliban have the option to lean on insurgent groups like the TTP and the BLA to move beyond border skirmishes

KARACHI: Weeks after the Taliban’s lightning offensive in 2021 wrested control of Afghanistan from a US-led military coalition, Pakistan’s then intelligence chief flew into the capital Kabul for talks, where the serving lieutenant general told a reporter: “Don’t worry, everything will be okay.”

Five years on, Islamabad — long seen as a patron of the Taliban — is locked in its heaviest fighting with the group, which Pakistan’s Defense Minister Khawaja Muhammad Asif described on Friday (February 27) as an “open war.”

The turmoil means that a wide swathe of Asia — from the Gulf to the Himalayas — is now in flux, with the United States building up a military deployment against Afghanistan’s neighbor Iran even as relations between Pakistan and arch rival India remain on edge after four days of fighting last May.

At the heart of the conflict with Afghanistan is Pakistan’s accusation that the Afghan Taliban provides support to militant groups, including the Tehreek-e-Taliban Pakistan (TTP), that have wreaked havoc across inside the South Asian country.

The Afghan Taliban, which has previously fought alongside the TTP, denies the charge, insisting that Pakistan’s security situation is its internal problem.

The disagreement is a reflection of starkly incompatible positions taken by both sides, as Pakistan expected compliance after decades of support to the Taliban, which did not see itself beholden to Islamabad, analysts said.

“We all know that the government in Pakistan supported the Taliban, the Afghan Taliban for many years, in the 90s and the 2000s, and provided havens to them during the period where the US and NATO were in Afghanistan.

So there’s a very close relationship between the Taliban and Pakistan,” said Jennifer Brick Murtazashvili, a political scientist at the University of Pittsburgh and an Afghanistan expert.

“It’s really surprising and shocking to many of us to see how quickly this relationship deteriorated,” she said.

Although tensions have simmered along their rugged 2,600-km (1,615-mile) frontier for months, following clashes last October, Friday’s fighting is notable because of Pakistan’s use of warplanes to hit Taliban military installations instead of confining the attacks to the militants it allegedly harbors.

These include targets deep inside the country in Kabul, as well as the southern city of Kandahar, the seat of Taliban supreme leader Hibatullah Akhundzada, according to Pakistan military spokesman Lt. Gen. Ahmed Sharif Chaudhry.

The clashes are unlikely to end there.

“I think in the immediate aftermath, I think hostilities will subside. There will be, I hope there will be a ceasefire through mediation. But I do not see these tensions subsiding in the foreseeable future,” said Abdul Basit,  an expert on militancy and violent extremism at Singapore’s S. Rajaratnam School of International Studies.

Nuclear-armed Pakistan has a formidable military of 660,000 active personnel, backed by a fleet of 465 combat aircraft, several thousand armored fighting vehicles and artillery pieces.

Across the border, the Afghan Taliban has only around 172,000 active military personnel, a smattering of armored vehicles and no real air force.

But the battle-hardened group, which took on a phalanx of Western military powers in 2001 and outlasted them, has the option to lean on insurgents like the TTP and the Baloch Liberation Army (BLA), moving beyond border skirmishes.

Based in Pakistan’s largest and poorest province of Balochistan that borders both Iran and Afghanistan, the BLA has been at the center of a decades-long insurgency, which in recent years has staged large coordinated attacks.

Pakistan has long accused India of backing the insurgents, a charge repeatedly denied by New Delhi, which has retained a robust military deployment along the border since last May.

Although a raft of countries with influence — including China, Russia, Turkiye and Qatar — have indicated an openness to help mediate the conflict, all such efforts have been met with limited success so far.