Facing his own troubles, Xi is reluctant to bail out SL and Pak as the debt mounts – Natural Self Esteem

In recent years, the US has accused China of using “debt diplomacy” to make developing countries around the world more dependent on Beijing.

But the cases of Sri Lanka and Pakistan — both friends of China struggling financially amid rising inflation — show that President Xi Jinping’s administration is growing reluctant to pull out the checkbook. China has still not fulfilled its pledge to repay a total of $4 billion in loans that Pakistan repaid in late March, and it has not responded to Sri Lanka’s requests for $2.5 billion in loan support reacted.

While China has pledged to help both countries, the more cautious approach reflects both a refinement of Xi’s signature “Belt and Road” initiative and a reluctance to meddle in chaotic domestic political situations. Pakistan got a new prime minister on Monday after parliament ousted former cricket star Imran Khan, and Sri Lanka’s leader is facing pressure from protesters to resign.

“Beijing has reconsidered its external lending in recent years because its banks realized they had a lot of debt with countries whose prospects of repayment were fairly limited,” said Raffaello Pantucci, senior fellow at the S. Rajaratnam School of International Studies at Nanyang Technological University. “This came on top of a worsening domestic economy, which also required a lot of spending, so there was less desire to just throw money around wantonly.”

China is currently facing economic woes of its own as lockdown measures aimed at containing the country’s worst Covid outbreak since early 2020 have paralyzed tech and financial hubs Shanghai and Shenzhen. Premier Li Keqiang on Monday told local authorities to “add a sense of urgency” in implementing policies as analysts warn that the official growth target of 5.5% is now at risk.

China has become the world’s largest sovereign creditor over the past decade, with its state-owned banks lending more to developing countries than either the International Monetary Fund or the World Bank in recent years. The opacity of the terms and size of some of these loans has been criticized, especially as the pandemic exacerbates debt problems in poorer countries.

Sri Lanka’s top diplomat said in Beijing this week he was “very confident” China would provide loan support, including $1 billion for the country to repay existing Chinese loans that mature in July. In an interview with Bloomberg, Ambassador Palitha Kohona said the process often takes months and he sees no delay.

“Given the current circumstances, there aren’t that many countries that can step up and do something,” he said. “China is one of those countries that can do something very quickly.”

Still, China’s role in resolving ongoing crises in South Asia may be limited, despite its status as a major creditor.

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