Chinese debt casts shadow over Maldives economy

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Chinese debt trap has cast a shadow over Maldivian economy with some estimates suggesting that island nation maybe owing huge amount to Beijing. China has faced criticism for its infrastructure projects in the developing countries, which are disguised as debt traps intended to increase Chinese footprints in the region.

According to a BBC report a 2.1 km (1.3-mile), four-lane bridge was built with USD 200m (£148m) from Beijing. The Sinamale bridge or China-Maldives Friendship Bridge, the first built between any islands in the Maldivian archipelago has also led to a boom in new property and commercial developments on the island of Hulumale.

It was one of the several projects undertaken during the tenure of Maldives pro-China President Abdullah Yameen, who was elected in 2013. As per the report, Yameen's tenure was also marked by allegations of human rights abuses with many politicians including former President Mohamed Nasheed, who is now Speaker, getting detained. Yameen suffered a surprise defeat in the election in 2018 and Ibrahim Mohammed Solih became President.

The Chinese debt bill was USD 3.1bn. As per the report, the figure included government to government loans money given to state enterprises and private sector loans guaranteed by the Maldivian government. The Speaker of Maldives Parliament is worried his country walked into a debt trap.

Nasheed said, can these assets produce enough revenue to pay back the debt? The business plan of none of these projects has any indication to suggest that it will be able to pay back the loan.

However, former Maldivian officials and Chinese representatives put the figure Male owes China between USD 1.1 to 1.4 billion, a huge sum for a country with GDP of around USD 4.9 billion. Nasheed worries Maldives could meet same fate as Sri Lanka where Chinese debt trap led to a Chinese state run enterprise acquired a 70 per cent stake in the Hambantota port on a 99-year lease in 2017.

Maldvies, which is heavily reliant on tourism has been hit hard by covid-19. According to the report, the foreign tourist arrivals were down 55 per cent by the end of June and estimates suggest the country may lose more than USD 700m more than a third of its tourism income, this year if the pandemic persists.

Chinese Ambassador to Maldives Zhang Lizhong dismissed the allegations that Maldives was facing a Chinese debt trap as a fiction. In an interview given to BBC News, published on Wednesday, the ambassador asserted that China never imposes additional requirements to the Maldivian side or any other developing country, which they do not want to accept or against their will.

However, Ambassador Zhang described that Nasheed's debt figure as highly exaggerated. Ambassador Zhang reiterated that China does not attach any pre-condition for the loans. Asserting that it does not happen and will not happen, the ambassador speculated that Nasheed may not have received the right information.

Current opposition party People's National Congress (PNC)'s Vice President Mohamed Hussain Shareef denied Nasheed's claims as well, describing them as baseless fear mongering. During his statements to BBC, Nasheed's concerns mainly revolved around Maldives seeing a similar fate as neighbouring Sri Lanka. Sri Lanka built a USD 1.5 billion port in Hambantota with Chinese loans but defaulted on the loan commitment a few years later after failing to pay back the required amount.

This resulted in a Chinese state run company acquiring 70 percent stake of the port on a 99 year lease. Moreover, China also secured 15,000 acres of land around the port to establish an economic zone. Stating that the business plans of Chinese funded projects lack any indication to suggest loan repayment, Nasheed posed the question of whether the assets can "produce enough revenue to pay back the debt.