World

World’s poorest countries pushed to brink of collapse under China debt

Published

3 years ago

May 25, 2023

At least a dozen poor countries are buckling under the weight of hundreds of billions of dollars in debt, most of which is owed to China.

A recent analysis, carried out by the Associated Press, found that for a dozen countries, paying back their debt is consuming a growing amount of their tax revenue needed to keep basic services going.

Among the countries analyzed was Pakistan, Kenya, Zambia, Laos and Mongolia and it was found that paying back their debt is also draining foreign currency reserves that these countries use to pay interest on the loans – leaving some with just months before that money is gone.

AP reported that behind the scenes is China’s reluctance to forgive debt and its extreme secrecy about how much money it has loaned and on what terms, which has kept other major lenders from stepping in to help.

According to World Bank data analyzed by Statista recently, countries heavily in debt to China are mostly located in Africa, but can also be found in Central Asia, Southeast Asia and the Pacific.

And, Statista reports that the new Belt and Road Initiative, which finances the construction of port, rail and land infrastructure, has created much debt to China for participating countries, specifically poor countries.

As of March last year, 215 cooperation documents had been signed with 149 countries on the initiative.

Countries in AP’s analysis meanwhile had as much as 50% of their foreign loans from China and most were devoting more than a third of government revenue to paying off foreign debt.

Two of them, Zambia and Sri Lanka, have already gone into default, unable to make even interest payments on loans financing the construction of ports, mines and power plants.

In Pakistan, millions of textile workers have been laid off because the country has too much foreign debt and can’t afford to keep the electricity on and machines running, AP stated.

In Kenya, the government has held back paychecks to thousands of civil service workers to save cash to pay foreign loans. The president’s chief economic adviser tweeted last month, “Salaries or default? Take your pick.”

The study also found that since Sri Lanka defaulted a year ago, a half-million industrial jobs have vanished, inflation has risen by 50% and more than half the population in many parts of the country has fallen into poverty.

The study found that experts predict that unless China begins to soften its stance on its loans to poor countries, there could be a wave of more defaults and political upheavals.

AP’s report stated that a case study of how it has played out is in Zambia, a landlocked country of 20 million people in southern Africa that over the past two decades has borrowed billions of dollars from Chinese state-owned banks to build dams, railways and roads.

While the loans boosted Zambia’s economy, they also raised foreign interest payments so high that there was little left for the government, forcing it to cut spending on healthcare, social services and subsidies to farmers for seed and fertilizer.

In the past under such circumstances, big government lenders such as the U.S., Japan and France would work out deals to forgive some debt, with each lender disclosing clearly what they were owed and on what terms so no one would feel cheated.

But China didn’t play by those rules, AP reported. It refused at first to even join in multinational talks, negotiating separately with Zambia and insisting on confidentiality that barred the country from telling non-Chinese lenders the terms of the loans.

By late 2020, Zambia was unable to pay the interest and defaulted, setting off a cycle of spending cuts and deepening poverty.

Since then, inflation in Zambia has increased by 50%, unemployment has hit a 17-year high and the nation’s currency, the kwacha, has lost 30% of its value in just seven months. AP also found that 3.5 million Zambians are now not getting enough food.

AP reported that a few months after Zambia defaulted, researchers found that the country owed $6.6 billion to Chinese state-owned banks, double what many thought at the time and about a third of the country’s total debt.

China’s unwillingness however to take big losses on the hundreds of billions of dollars it is owed, as the International Monetary Fund and World Bank have urged, has left many countries on a treadmill of paying back interest, which stifles the economic growth that would help them pay off the debt.

For Pakistan, its foreign cash reserves have plunged more than 50%, according to AP’s analysis, while in nine of the 12 countries analyzed, foreign cash reserves have dropped on average of 25% in just one year.

Based on this, Pakistan for example has only two months left of foreign cash to pay for food, fuel and other essential imports if it does not get a bailout. Other countries, such as Mongolia, have eight months left.

AP found that last month, Pakistan was so desperate to prevent more blackouts that it struck a deal to buy discounted oil from Russia, breaking ranks with the US-led effort to shut off Vladimir Putin’s funds.

In Sri Lanka, rioters poured into the streets last July, setting homes of government ministers aflame and storming the presidential palace, sending the leader tied to onerous deals with China fleeing the country.

China has however disputed the idea that Beijing is an unforgiving lender and said in a statement that the Federal Reserve was to blame.

It said that if it is to accede to IMF and World Bank demands to forgive a portion of its loans, so should multilateral lenders, which it views as US proxies.

“We call on these institutions to actively participate in relevant actions in accordance with the principle of ‘joint action, fair burden’ and make greater contributions to help developing countries tide over the difficulties,” the statement said.

But China’s approach to lending is widely considered more transactional and criticized as “opaque” and analysts see Beijing’s desire to access oil, minerals and other commodities as the driving force behind Chinese lenders being less prone to applying strict conditions in helping governments finance roads, bridges and railroads – so as to unlock those resources.

Just last month, US Treasury Secretary Janet Yellen told lawmakers: “I’m very, very concerned about some of the activities that China engages in globally, investing in countries in ways that leave them trapped in debt and don’t promote economic development.”

“We are working very hard to counter that influence in all of the international institutions that we participate in,” she said.

Since 2017, China has become the world’s largest official creditor, surpassing the World Bank, IMF and 22-member Paris Club combined, Brent Neiman, a counselor to Yellen, said late last year.

Politico meanwhile reported earlier this month that China’s financing of projects in other countries between 2000 and 2017 totaled more than $800 billion, most of that in the form of loans.

But for some poor countries struggling to repay China, they now find themselves stuck in a kind of loan limbo: China won’t budge in taking losses, and the IMF won’t offer low-interest loans if the money is just going to pay interest on Chinese debt.

Up Next

Four dead, suspect arrested in rare shooting in Japan

Don't Miss

Saudi embrace of Assad sends strong signal to US

World

EU leaders agree joint borrowing to fund Ukraine, setting aside plan to use Russian frozen assets

Published

24 hours ago

December 19, 2025

Ariana News

European Union leaders decided on Friday to borrow cash to fund Ukraine’s defence against Russia for the next two years rather than use frozen Russian assets, sidestepping divisions over an unprecedented plan to finance Kyiv with Russian sovereign cash.

“Today we approved a decision to provide 90 billion euros to Ukraine,” EU summit chairman Antonio Costa told a news conference early on Friday morning after hours of talks among the leaders in Brussels, Reuters reported. “As a matter of urgency, we will provide a loan backed by the European Union budget.”

The leaders also gave the European Commission a mandate to keep working on a so-called reparations loan based on Russian immobilised assets but that option proved unworkable for now, above all due to resistance from Belgium, where the bulk of the assets is held.

The idea of EU borrowing initially seemed unworkable as it requires unanimity and Hungary’s Russia-friendly Prime Minister Viktor Orban had opposed it. But Hungary, Slovakia and the Czech Republic agreed to let the scheme go ahead as long as it did not impact them financially.

The EU leaders said Russian assets, totalling 210 billion euros in the EU, will remain frozen until Moscow pays war reparations to Ukraine. If Moscow ever takes such a step, Ukraine could then use they money to pay back the loan.

USE OF RUSSIAN ASSETS TO COMPLEX AT THIS STAGE

“This is good news for Ukraine and bad news for Russia and this was our intention,” German Chancellor Friedrich Merz said.

The stakes for finding money for Kyiv were high because without the EU’s financial help, Ukraine would run out of money in the second quarter of next year and most likely lose the war to Russia, which the EU fears would bring closer the threat of Russian aggression against the bloc.

The decision follows hours of discussions among leaders on the technical details of an unprecedented loan based on the frozen Russian assets, which turned out to be too complex or politically demanding to resolve at this stage.

The main difficulty was providing Belgium, where 185 billion euros of the total Russian assets in Europe are held, with sufficient guarantees against financial and legal risks from potential Russian retaliation for the release of the money to Ukraine.

“There were so many questions on the Reparations Loan, we had to go to Plan B. Rationality has prevailed,” Belgian Prime Minister Bart De Wever told a news conference. “The EU has avoided chaos and division and remained united,” he said.

HUNGARY SCORES A WIN

With public finances across the EU already strained by high debt levels, the European Commission had proposed using the Russian assets for a loan to Kyiv or joint borrowing against the EU budget.

Using the latter option allowed Orban to claim a diplomatic victory.

“Orban got what he wanted: no reparation loan. And EU action without participation of Hungary, Czech Republic and Slovakia,” one EU diplomat said.

‘CAN’T AFFORD TO FAIL’

Several EU leaders arriving at the summit said it was imperative they find a solution to keep Ukraine financed and fighting for the next two years. They were also keen to show European countries’ strength and resolve after U.S. President Donald Trump last week called them “weak”.

“We just can’t afford to fail,” EU foreign policy chief Kaja Kallas said.

Ukrainian President Volodymyr Zelenskiy, who took part in the summit, urged the bloc to agree to use the Russian assets to provide the funds he said would allow Ukraine to keep fighting.

“The decision now on the table – the decision to fully use Russian assets to defend against Russian aggression – is one of the clearest and most morally justified decisions that could ever be made,” he said.

World

US readies new Russia sanctions if Putin rejects peace deal, Bloomberg News reports

A State Department spokesperson told Reuters it does not preview sanctions.

Published

2 days ago

December 18, 2025

Ariana News

The United States is preparing a further round of sanctions targeting Russia’s energy sector to increase pressure on Moscow should it reject a peace deal with Ukraine, Bloomberg News reported on Wednesday, citing people familiar with the matter.

A White House official told Reuters that U.S. President Donald Trump had made no new decisions regarding Russian sanctions.

“It is the role of agencies to prepare options for the president to execute,” the official said.

Bloomberg had reported the U.S. was considering options including targeting vessels in what is known as Russia’s shadow fleet of tankers used to transport exported oil, as well as traders who facilitate such transactions.

The new measures could be announced as early as this week, the report said, adding that Treasury Secretary Scott Bessent discussed the move with a group of European ambassadors this week.

“It is explicitly false to conclude any decisions have been made regarding future sanctions against Russia. As we have said for months, all options remain on the table in support of President Trump’s tireless efforts to stop the senseless killing, and to achieving a lasting, durable peace,” a U.S. Treasury Department spokesperson said.

A State Department spokesperson told Reuters it does not preview sanctions.

Asked about the Bloomberg article, the Kremlin said it had not seen the report but that any sanctions harm efforts to mend U.S.-Russia relations.

World

Trump adds seven countries, including Syria, to full travel ban list

The White House cited visa overstay rates for Syria in its justification for the ban.

Published

3 days ago

December 17, 2025

Ariana News

U.S. President Donald Trump on Tuesday expanded a list of countries subject to a full travel ban, prohibiting citizens from an additional seven countries, including Syria, from entering the United States.

The White House said in a statement that Trump signed a proclamation “expanding and strengthening entry restrictions on nationals from countries with demonstrated, persistent, and severe deficiencies in screening, vetting, and information-sharing to protect the Nation from national security and public safety threats.”

Tuesday’s move banned citizens from Burkina Faso, Mali, Niger, South Sudan, Syria and those holding Palestinian Authority-issued travel documents. The action also imposes a full ban on Laos and Sierra Leone, which had previously only been subject to partial restrictions.

The White House said the expanded ban goes into effect on January 1.

The action comes despite Trump’s vow to do everything he could to make Syria successful after landmark talks in November with Syrian President Ahmed al-Sharaa, a former al Qaeda commander who until recently was sanctioned by Washington as a foreign terrorist.

Trump has backed Sharaa, whose visit capped a stunning year for the rebel-turned-ruler who toppled longtime autocratic leader Bashar al-Assad and has since traveled the world trying to depict himself as a moderate leader who wants to unify his war-ravaged nation and end its decades of international isolation.

But in a post on his Truth Social platform on Saturday, Trump vowed “very serious retaliation” after the U.S. military said two U.S. Army soldiers and a civilian interpreter were killed in Syria by a suspected Islamic State attacker who targeted a convoy of American and Syrian forces before being shot dead. He described the incident in remarks to reporters as a “terrible” attack.

The White House cited visa overstay rates for Syria in its justification for the ban.

“Syria is emerging from a protracted period of civil unrest and internal strife. While the country is working to address its security challenges in close coordination with the United States, Syria still lacks an adequate central authority for issuing passports or civil documents and does not have appropriate screening and vetting measures,” the White House said.

Trump signed a proclamation in June banning the citizens of 12 countries from entering the United States and restricting those from seven others, saying it was needed to protect against “foreign terrorists” and other security threats. The bans apply to both immigrants and non-immigrants, such as tourists, students and business travelers.

The travel ban remains on those twelve countries, the White House said.

Trump also added partial restrictions and entry limitations on an additional 15 countries, including Nigeria, which is under scrutiny from Trump, who in early November threatened military action over the treatment of Christians in the country.

Nigeria says claims that Christians face persecution misrepresent a complex security situation and do not take into account efforts to safeguard religious freedom.

Since returning to office in January, Trump has aggressively prioritized immigration enforcement, sending federal agents to major U.S. cities and turning away asylum seekers at the U.S.-Mexico border.

The expansion of the countries subject to entry restrictions marks a further escalation of immigration measures the administration has taken since the shooting of two National Guard members in Washington, D.C., last month.

Investigators say the shooting was carried out by an Afghan national who entered the U.S. in 2021 through a resettlement program under which Trump administration officials have argued there was insufficient vetting.

Days after the shooting, Trump vowed to “permanently pause” migration from all “Third World Countries,” although he did not identify any by name or define the term.