One problem that has gained traction in recent years is the idea of "debt trap diplomacy," in which China's lending policies to poorer nations have been criticized for leaving them unable to repay loans and hence subject to Beijing's pressure. In this essay, we will examine Bangladesh's debt relationship with China and analyze the possibility of Bangladesh sliding into a Chinese debt trap.
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| Bangladeshi Prime Minister Sheikh Hasina meets her Chinese counterpart President Xi Jinping in 2019 (Source: AP) |
Bangladesh has received Chinese investment and funding, mainly for infrastructure projects like ports and power plants. While these investments have been hailed as advantageous to Bangladesh's economic growth, there have been worries voiced about the terms and circumstances of Chinese finance, particularly the possibility of debt trap diplomacy. This article will look at the financial ramifications of Chinese investment in Bangladesh, as well as the possibility of Bangladesh slipping into a Chinese debt trap.
In recent years, China has made significant investments in infrastructure projects in Bangladesh, with an emphasis on expanding the country's transportation and energy sectors. These investments came in a number of forms, including direct investment, loans, and grants. While Chinese finance has aided Bangladesh's economic progress, questions have been raised concerning the terms and circumstances of these loans, notably their possible influence on Bangladesh's debt sustainability.
Assessing Bangladesh's Debt Sustainability
To estimate the possibility of Bangladesh sliding into a Chinese debt trap, the country's debt sustainability must first be assessed. Bangladesh's external debt remained at $49.7 billion at the end of 2021, corresponding to 19.7% of GDP, according to figures from the International Monetary Fund (IMF). While this is a modest amount of external debt in comparison to many other developing nations, the trajectory of Bangladesh's debt levels must be considered in the context of continued expenditures in infrastructure and other development projects.
Chinese Debt in Bangladesh
In recent years, China has been a key source of funding for Bangladesh, with Chinese loans accounting for a large share of the country's foreign debt. One example of Chinese investment in Bangladesh is the building of the Payra Power Station, which was funded by a $1.56 billion loan from China Exim Bank. While this project has been hailed as a significant advancement for Bangladesh's energy industry, questions have been expressed regarding the loan's possible influence on Bangladesh's debt sustainability.Risk of Chinese Debt Trap Diplomacy
With Bangladesh's increasing reliance on Chinese finance for infrastructure projects, the possibility of Chinese debt trap diplomacy cannot be overlooked. Bangladesh is one of the nations most at danger of sliding into a Chinese debt trap, according to a Center for Global Development research, with Chinese loans accounting for more than 10% of the country's GDP. Since the actual terms and circumstances of these loans are not often clear, Bangladesh must carefully assess the dangers connected with taking on large amounts of debt from China.