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

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(Last Updated On: 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.

 

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Reactions to the death of Iran’s president in a helicopter crash

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(Last Updated On: May 20, 2024)

Iranian President Ebrahim Raisi, a hardliner long seen as a potential successor to Supreme Leader Ayatollah Ali Khamenei, was killed in a helicopter crash in mountainous terrain near the Azerbaijan border, officials and state media said on Monday.

The helicopter was also carrying Foreign Minister Hossein Amirabdollahian and six other passengers and crew.

Here are reactions to the news:

AFGHANISTAN’S ACTING PRIME MINISTER MULLAH MOHAMMAD HASSAN AKHUND, IN A STATEMENT:

“We share in the grief of the Islamic Republic of Iran and its people and extend our condolences to all the families of the victims, the nation, and the government of Iran.

“In these difficult times, we stand alongside the people of Iran and pray for forgiveness for all the victims of this incident and for patience for their families.”

PALESTINIAN PRESIDENT MAHMOUD ABBAS, IN A STATEMENT:

“We extend our sincere condolences and sympathy to the brotherly Iranian people for the passing of the late President Ibrahim Raisi and the Foreign Minister, praying to Almighty God to bestow His vast mercy upon the deceased Iranian President and the others, and to grant patience and solace to their families, affirming the solidarity of the State of Palestine and its people with the Iranian leadership and people in this great affliction.”

RUSSIAN PRESIDENT VLADIMIR PUTIN IN A MESSAGE:

“Seyed Ebrahim Raisi was an outstanding politician whose entire life was devoted to serving the Motherland.

“As a true friend of Russia, he made an invaluable personal contribution to the development of good neighbourly relations between our countries and made great efforts to bring them to the level of strategic partnership.”

TURKISH PRESIDENT TAYYIP ERDOGAN, ON X, FORMERLY KNOWN AS TWITTER:

“As a colleague who personally witnessed his efforts for the peace of the Iranian people and our region during his time in power, I remember Mr. Raisi with respect and gratitude.”

NECHIRVAN BARZANI, PRESIDENT OF THE IRAQI KURDISTAN REGION, IN A STATEMENT:

“The passing of President Raisi is an immense tragedy and a profound loss for the Islamic Republic of Iran, its people, and its friends.

“Nevertheless, we have faith that the noble people of Iran and the Islamic Republic will overcome this immense loss. May God Almighty provide assistance and protection to all, and may the memory of the departed be blessed.”

ARAB LEAGUE CHIEF AHMED ABOUL GHEIT, IN A STATEMENT:

“We pray to God to shower them with mercy and forgiveness and to inspire their families with patience and solace.”

SUDAN’S SOVEREIGN COUNCIL HEAD ABDEL FATTAH AL-BURHAN, IN A STATEMENT:

“While the President of the Sovereign Council extends his sincere condolences and sympathy to the friendly Iranian people, he prays to God Almighty that he may have mercy on the President and his companions, and grant their families patience and solace, expressing the solidarity of the Government of Sudan and its people with the leadership and the Iranian people in this great loss.”

MALAYSIAN PRIME MINISTER ANWAR IBRAHIM, ON FACEBOOK:

“I had the honour of meeting President Raisi on the sidelines of the UN General Assembly last November.

“He exemplified a deep commitment to the welfare of his people and the dignity of his nation, which represents a proud and rich civilisation rooted in the principles of Islam.

“His dedication to justice, peace, and the uplift of the ummah was truly inspiring. We committed ourselves to bolstering Malaysia-Iran relations, working together for the betterment of our peoples and the Muslim world. Our pledge will be fulfilled.”

ITALIAN PRIME MINISTER GEORGIA MELONI ON BROADCASTER CHANNEL 5 TELEVISION:

“I see in these hours that the Iranian authorities are crediting the thesis of the accident and not conspiracy theories.

“I do not see any changes in the internal order in Iran, we are in constant contact with our European and G7 allies because we are talking about an incident that is part of a particularly complex regional framework.

“I hope that the future Iranian leadership wants to commit itself to the stabilisation and pacification of the region.”

CHARLES MICHEL, PRESIDENT OF THE EUROPEAN COUNCIL, ON X:

“The European Union expresses its sincere condolences for the death of President Raisi and Foreign Minister Abdollahian, as well as other members of their delegation and crew in a helicopter accident. Our thoughts go to the families.”

JAPAN’S GOVERNMENT SPOKESPERSON YOSHIMASA HAYASHI:

Japan expresses its deepest condolences to the government and people of Iran over the death of President Raisi and the foreign minister.

VENEZUELAN PRESIDENT NICOLAS MADURO, ON X:

“…Deeply saddened to have to say goodbye to an exemplary person, an extraordinary leader of the world as our brother Ebrahim is, and will always be, an excellent human being, defender of the sovereignty of his people and unconditional friend of our country.

“From Bolivarian lands, we express our deepest condolences to Supreme Leader Ayatollah Ali Khamenei and wish for divine consolation for such a sensitive loss.”

MARYAM RAJAVI, PRESIDENT-ELECT OF THE PARIS-BASED NATIONAL COUNCIL OF RESISTANCE OF IRAN OPPOSITION GROUP, IN A STATEMENT:

“This represents a monumental and irreparable strategic blow to the mullahs’ Supreme Leader Ali Khamenei and the entire regime, notorious for its executions and massacres.

“It will trigger a series of repercussions and crises within theocratic tyranny, which will spur rebellious youths into action.

“The curse of mothers and those seeking justice for the executed, along with the damnation of the Iranian people and history, mark the legacy of Ebrahim Raisi, the notorious perpetrator of the 1988 massacre of political prisoners.”

EGYPTIAN PRESIDENT ABDEL FATTAH EL-SISI, IN A STATEMENT:

“The president of the Arab Republic of Egypt … prays that the deceased Iranian President and the departed may rest in God Almighty’s mercy, and grant their families patience and solace, expressing the solidarity of the Arab Republic of Egypt with the Iranian leadership and people in this terrible incident.”

LEBANON’S IRAN-BACKED HEZBOLLAH GROUP, IN A STATEMENT:

It praised the struggle of the martyrs in defending the causes of the nation and their service to Iran, calling on God to bless them with his mercy, to protect Khamenei, and to grant Iran the ability to overcome the ordeal with patience and determination.

SRI LANKA PRESIDENT RANIL WICKREMESINGHE, ON X:

“I express my deepest sympathies and sincere condolences to the bereaved families, the government and the people of Iran. Our thoughts and prayers are with the families of President Raisi and his entourage.”

JORDAN’S KING ABDULLAH, ON X:

“My deepest condolences to the brothers, leadership, government and people of the Islamic Republic of Iran on the death of Brother President Ebrahim Raisi, Foreign Minister Brother Hossein Amir Abdullahian and those accompanying them, may God have mercy on them all.

“We stand in solidarity with our brothers in Iran in this difficult circumstance”

UAE PRIME MINISTER SHEIKH MOHAMMED BIN RASHID AL-MAKTOUM, IN A STATEMENT:

“Our hearts are with you in this difficult time. Our prayers are that God will cover them with His vast mercy and dwell them in His spacious Paradise.”

SYRIAN PRESIDENT BASHAR AL-ASSAD, IN A STATEMENT:

In a statement of condolence, Assad affirmed Syria’s solidarity with the Islamic Republic of Iran and the families of the dead, adding that Raisi’s dedication to his work and duties had taken him to East Azerbaijan to inaugurate a vital project for his country, where he was martyred in the line of duty.

Assad added that Syria had worked with the late president to ensure strategic ties between Syria and Iran remained prosperous, recalling Raisi’s important visit to Syria as part of enhancing ties for the benefit of both nations.

IRAQ PRIME MINISTER MOHAMMED SHIA AL-SUDANI, IN A STATEMENT:

“We extend our heartfelt condolences and sympathies to the Supreme Leader of the Islamic Republic, Ali Khamenei, and to the nation of Iran, its government and people.

“We express our solidarity with the brotherly Iranian people and the officials of the Islamic Republic during this painful tragedy.”

HAMAS STATEMENT:

The statement conveyed Hamas’ “deepest condolences…for “this immense loss.”

It praised the deceased Iranian leaders for supporting the Palestinian cause and resistance against Israel and expressed confidence that Iran’s “deep-rooted institutions” will enable it to overcome “the repercussions of this great loss.”

MOHAMMED ALI AL-HOUTHI, HEAD OF YEMEN’S HOUTHI SUPREME REVOLUTIONARY COMMITTEE, ON X:

“We ask God to grant their families patience and solace. Verily we belong to Allah and to Him we shall return. The Iranian people will remain adhering to the loyal leaders of their people, by God’s will.”

QATAR’S EMIR SHEIKH TAMIN BIN HAMAD AL-THANI, ON X:

“Sincere condolences to the government and people of the Islamic Republic of Iran…asking God Almighty for mercy and forgiveness for them and for their families with patience and solace.

“We belong to Allah and to Him we shall return.”

PAKISTAN PRIME MINISTER SHEHBAZ SHARIF, ON X:

“The great Iranian nation will overcome this tragedy with customary courage.

“Pakistan will observe a day of mourning and the flag will fly at half mast as a mark of respect for President Raisi and his companions and in solidarity with brotherly Iran.”

INDIAN PRIME MINISTER NARENDRA MODI ON X:

“Deeply saddened and shocked by the tragic demise of Dr. Seyed Ebrahim Raisi, president of the Islamic Republic of Iran. His contribution to strengthening India-Iran bilateral relationship will always be remembered.

“My heartfelt condolences to his family and the people of Iran. India stands with Iran in this time of sorrow.”

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Saudi crown prince, US national security adviser meet on Gaza, bilateral deal

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(Last Updated On: May 19, 2024)

Saudi Crown Prince Mohammed bin Salman and White House National Security Adviser Jake Sullivan met to discuss a broad bilateral agreement and Israel’s war in Gaza, the Saudi state news agency reported on Sunday.

The meeting in the Saudi city of Dhahran reviewed “the semi-final version of the draft strategic agreements between the two countries, which are almost being finalised,” a statement read.

Washington and Riyadh have been discussing U.S. security guarantees and civilian nuclear assistance as part of a broader deal that the U.S. hopes would lead to normalising Saudi-Israeli relations.

The de facto Saudi leader and President Joe Biden’s top security aide also discussed the need to find a “credible track for bringing about the two-state solution” for Israel and the Palestinians, stop the war against Hamas militants in Gaza and facilitate the entry of humanitarian aid, the statement said.

The Biden administration and Saudi Arabia have been seeking to finalise the nuclear agreement, Reuters reported early this month, even as Israel-Saudi normalisation, part of a Middle East “grand bargain”, remains elusive.

The White House said on Friday that Sullivan would visit Saudi Arabia and Israel to discuss bilateral and regional matters, including Gaza and efforts to achieve lasting peace and security in the region.

Saudi Arabia, as the world’s largest oil exporter, is not an obvious candidate for a nuclear pact typically aimed at building power plants.

But the kingdom is seeking to generate substantial renewable energy and reduce emissions under an ambitious long-term plan, while critics say Riyadh might want nuclear expertise in case it someday wished to acquire nuclear weapons, despite safeguards enshrined in any deal with Washington to prevent this.

 

(Reuters)

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Fierce fighting in northern Gaza as aid starts to roll off US-built pier

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(Last Updated On: May 18, 2024)

Israeli forces battled Hamas fighters in the narrow alleyways of Jabalia in northern Gaza on Friday in some of the fiercest engagements since they returned to the area a week ago, while in the south Hamas attacked tanks massing around Rafah.

Residents said Israeli armour had thrust as far as the market at the heart of Jabalia, the largest of Gaza’s eight historic refugee camps, and that bulldozers were demolishing homes and shops in the path of the advance, Reuters reported.

“Tanks and planes are wiping out residential districts and markets, shops, restaurants, everything. It is all happening before the one-eyed world,” Ayman Rajab, a resident of western Jabalia, said via a chat app.

Israel had said its forces cleared Jabalia months earlier in the Gaza war, triggered by the deadly Hamas-led attacks on southern Israel on Oct. 7, but said last week it was returning to prevent Hamas re-grouping there.

In southern Gaza bordering Egypt, thick smoke rose over Rafah, where an escalating Israeli assault has sent hundreds of thousands of people fleeing from what was one of the few remaining places of refuge.

“People are terrified and they’re trying to get away,” Jens Laerke, U.N. humanitarian office spokesperson, said in Geneva, adding that most were following orders to move north towards the coast but that there were no safe routes or destinations.

As the fighting raged, the U.S. military said trucks started moving aid ashore from a temporary pier, the first to reach the besieged enclave by sea in weeks.

The World Food Programme, which expects food, water, shelter and medical supplies to arrive through the floating dock, said the aid was transported to its warehouses in Deir Al Balah in central Gaza and told partners it was ready for distribution.

The United Nations earlier reiterated that truck convoys by land – disrupted this month by the assault on Rafah – were still the most efficient way of getting aid in.

“To stave off the horrors of famine, we must use the fastest and most obvious route to reach the people of Gaza – and for that, we need access by land now,” deputy U.N. spokesperson Farhan Haq said.

U.S. aid was arriving in Cyprus for delivery to Gaza via the new pier, Washington said.

Hamas demanded an end to Israel’s siege and accused Washington of complicity with an Israeli policy of “starvation and blockade”.

The White House said U.S. national security adviser Jake Sullivan would visit Israel on Sunday and stress the need for a targeted offensive against Hamas rather than a full-scale assault on Rafah.

A group of U.S. medical workers left the Gaza Strip after getting stuck at the hospital where they were providing care, the White House said.

HUMANITARIAN FEARS

The Israel Defense Forces said troops killed more than 60 militants in Jabalia in recent days and located a weapons warehouse in a “divisional-level offensive”.

A divisional operation would typically involve several brigades of thousands of troops each, making it one of the biggest of the war.

“The 7th Brigade’s fire control centre directed dozens of airstrikes, eliminated terrorists and destroyed terrorist infrastructure,” the IDF said.

At least 35,303 Palestinians have now been killed, according to figures from the enclave’s health ministry, while aid agencies have warned repeatedly of widespread hunger and dire shortages of fuel and medical supplies.

Israel says it must capture Rafah to destroy Hamas and ensure the country’s safety. In the Hamas attack on Oct. 7, 1,200 people died in Israel and 253 were taken hostage, according to Israeli tallies. About 128 hostages are still being held in Gaza.

Israel said on Friday that its forces retrieved the bodies of three people killed at the Nova music festival in Israel on Oct. 7 and taken into Gaza.

In response, Hamas said negotiations were the only way for Israel to retrieve hostages alive: “The enemy will not get its prisoners except as lifeless corpses or through an honourable exchange deal for our people and our resistance.”

Talks on a ceasefire have been at an impasse.

‘TRAGIC WAR’

Israeli tanks and warplanes bombarded parts of Rafah on Friday, while the armed wings of Hamas and Islamic Jihad said they fired anti-tank missiles and mortars at forces massing to the east, southeast and inside the Rafah border crossing with Egypt.

UNRWA, the main U.N. aid agency for Palestinians, said more than 630,000 people had fled Rafah since the offensive began on May 6.

“They’re moving to areas where there is no water – we’ve got to truck it in – and people aren’t getting enough food,” Sam Rose, director of planning at UNRWA, told Reuters on Friday by telephone from Rafah, where he said it was eerily quiet.

At the International Court of Justice, or World Court, in The Hague, where South Africa has accused Israel of violating the Genocide Convention, Israeli Justice Ministry official Gilad Noam defended the operation.

The South African legal team, which set out its case for fresh emergency measures the previous day, framed the Israeli military operation as part of a genocidal plan aimed at bringing about the destruction of the Palestinian people.

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