US accusation of BRI only backfires on "debt traps" of IMF
As the Belt and Road Initiative (BRI) gains pace with over 130 countries signed up to benefit from Chinese President Xi Jinping’s “project of the century,” so has the barrage of fear-mongering articles increased in western media accusing China of pursuing “debt-trap diplomacy” in developing countries.
According to Washington, China is allegedly using “debt-trap diplomacy” by tempting developing nations into borrowing unpayable loans for infrastructure projects, and once those nations default it will control the country’s assets, land, and mineral resources.
In order to substantiate this claim the US-based AidData has released a report titled ‘Banking on the Belt and Road: Insights from a new global dataset of 13,427 Chinese development projects’ which warns that China is owed $385bn – including ‘hidden debt’ from poorer nations.
The basic conclusion by the AidData is that there are “major implementation challenges” with 35% of BRI projects, with problems including corruption scandals, labour violations, environmental hazards, and public protests. Brad Parks from the AidData states "A growing number of policymakers in low- and middle-income countries are mothballing high profile BRI projects because of overpricing, corruption and debt sustainability concerns."
Professor Richard Wolff, author of Democracy at Work: A Cure for Capitalism, said on RT International that “the report is just fear-mongering, with some statistics taken out of context” revealing nothing new, as development projects implemented in mainly under-developed countries face many issues due to weak rule of law and infrastructure.
The US report alludes to how China may seize assets if debts are not paid back, yet ignores the fact that China cancelled 3.4 billion debt to African countries and in turn injected more money to keep projects afloat. A fact is also affirmed by Johns Hopkins University’s China-Africa Research Initiative (CARI) whose report on Chinese lending in Africa concludes that no evidence was found “where we would say the Chinese deliberately entangled another country in debt, and then used that debt to extract unfair or strategic advantages of some kind in Africa, including ‘asset seizures’.”
Lawrence Freeman, a political-economic analyst on Africa in an article ‘Belt and Road Initiative is not debt-trapping Africa,’ writes “China through BRI is helping to finance and construct vitally needed infrastructure in Africa. He quotes W. Gyude Moore, a senior policy fellow at the Centre for Global Development, who states that given the West’s “complicated, enmeshed, centuries-long history in Africa, there has never been a Western proposal for continental-scale infrastructure building … It was the Chinese who sought to build a road, rail and maritime infrastructure network to link Africa’s economies with the rest of the world.”
Freeman argues that “The United States, whose foreign policy is increasingly vectored at countering China’s rising political and economic power in the world, has no strategy or intention of making a similar commitment to the African continent”.
This is evident by Washington’s haphazard policies, whereby in one instance the Group of Seven (G7) introduces a new initiative to ‘Build Back Better World' (B3W) and the next it forms a new trilateral military alliance, (AUKUS), arming Australia with nuclear submarines to threaten China undermining regional peace and stability.
However, Washington is not interested in facts that contradict their narrative, rather US officials and the vast media propaganda machine are continuing to repeat the debt-trap accusations with an aim to discredit BRI.
In October 2018, Vice President Mike Pence said that China is “offering hundreds of billions of dollars in infrastructure loans to governments… yet the terms of those loans are opaque at best, and the benefits flow overwhelmingly to Beijing”.
He cited as evidence the Sri Lankan government who in 2017 leased Hambantota Port to China Merchants Port Holdings for 99 years due to the difficulty it was facing regarding loans. What the Vice President ignored but was highlighted by Dushni Weerakoon and Sisira Jayasuriya in an article in East Asia Forum is that “Sri Lanka’s debt repayment problems had very little to do with Chinese loans,” and that the real issue was Sri Lanka “meeting its obligations to international investors and commercial lenders.”
The reality is that the US and 300 years of Western imperialism strived to control, oppress, and steal the resources of developing countries. George Orwell who served as an imperial policeman in Burma from 1922-27 noted in The Road to Wigan Pier, that the “high standard of life we enjoy in England” is a result of a “hundred million Indians” living on the verge of starvation.
A century later not much is changed regarding the North-South divide and the millions living in developing countries trapped in a cycle of poverty and exploitation, through policies implemented by the International Monetary Fund (IMF) and the World Bank. The Euro-centric West over-looks the legacy of its ‘development policies’ which are the cause of half of humanity living below the poverty line.
While western aid agencies put out adverts asking money to help “seven-year-old Ayesha walking miles to get water,” or “babies dying of malnutrition in Yemen,” they omit the fact that Africa is one of the richest countries in the world in terms of natural resources and turned into a ‘begging bowl’ a result of West’s debt-traps and perpetual wars.
Paul Craig Roberts, author of The Failure of Laissez Faire Capitalism outlines how historically the west has looted third world countries and how IMF plays a lead role in this. He argues “the gullible” governments are offered “foreign loans to implement a Western-presented development plan.” However, in reality the country becomes indebted beyond its foreign currency earnings. Unable to pay back the loan, the creditors send in IMF to lend it money to pay its bank creditors. Now IMF is in a controlling position it will apply austerity measures cutting back public services, public pensions, and sell national resources to foreigners. Robert argues the exploitation doesn’t stop there, but rather the West pushes a “policy on Third World countries of abandoning food self-sufficiency and producing one or two crops for export earnings. This policy makes Third World populations dependent on food imports from the West. Thus, self-sufficiency is transformed into indebtedness”.
Such policies have hindered the development in third-world debt-ridden countries for decades. Nick Dearden Director of ‘Global Justice Now’ argues that even before “we had even heard of COVID-19" the International Monetary Fund (IMF) warned that 34 countries were at risk of debt distress and this was a conservative estimate. He argues that more than 60 countries cannot build a basic health system because the “world’s poorest countries are repaying vast sums year on year to rich countries, international “anti-poverty” funds – public bodies such as the IMF – and major banks is a damning indictment on our global economy.”
While the US propagates the debt-trap narrative, the biggest worry for the West is that China’s Belt Road Initiative offers a much-needed alternative for the global South.
China’s rapid development and eradication of poverty have set a precedent for developing cash-strapped nations. China has spent 85 billion in development finance and provided the much- needed assistance during the Covid 19 pandemic. More importantly it has provided trade and economic cooperation for countries who are victims of US bullying and sanctions like, Iran, Cuba, Syria, Pakistan, Venezuela, and Russia amongst others. The West has used financial aid incentives as a weapon to gain influence or punish nations for centuries.
China’s policy of cooperation and partnership, offering low-interest long-term loans to implement infrastructure, encourage trade and investment has presented the Global South and Latin American countries buried in IMF and western financial institutions ‘debt-trap’, to eventually become independent.
While Washington continues its hybrid war against humanity, oblivious to its declining importance on the world’s stage, one fact is clear that developing nations have woken up to realise that centuries of colonialism and predatory neoliberal capitalism led by the US has offered third world countries nothing but poverty, unemployment, perpetual wars, and a global refugee crisis.