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Eurasia
March 9, 2018 www.intellinews.com I Page 24
demand — of up to $1.7 trillion per year in Asia.
A separate report by the Global Infrastructure Hub, a G20 initiative, shows that the four regional economic hubs in the CEE/CIS region — Russia, Kazakhstan, Turkey and Poland — are facing a combined infrastructure gap of $1.307 trillion over the next 23 years.
“Belt and Road provides something that countries desperately want – financing for infrastructure ... But when it comes to this type of lending, there can be too much of a good thing,” said John Hurley, a visiting fellow at the Center for Global Development and a coauthor of the study.
Chinese state controlled banks have also
been more amenable to funding, for example, coal-fired power plants and other projects
that are increasingly shunned by international development banks on environmental grounds. In the Western Balkans, the plethora of new coal power plants in the works are almost invariably backed by Chinese banks and planned to be built by Chinese engineering firms.
The Center for Global Development study looks at the 23 countries currently at risk of debt distress and incorporates the OBOR lending pipeline
into each country’s debt as of the end of 2016
to estimate which are likely to suffer from debt distress as a result.
Of the eight countries, the Maldives’ debt is set to reach the highest level of 109% of GDP this year. Within the CEE/CIS region, Mongolia’s will be the highest, rising from 62.1% of GDP in 2016 to 89% this year, followed by Montenegro’s — up more gradually from 76.1% in 2015 to 80.9% in 2018.
In the two lower income CEE/CIS countries included in the report — Kyrgyzstan and Tajikistan — the levels of debt as a percentage of GDP are forecast to be lower this year at 65.5% and 56.8% respectively. However, the two countries are less able to cope with increased debt burdens than their more affluent peers, and Tajikistan’s debt is increasing dramatically, rising from just 33.4% of
GDP in 2015 to an expected 56.8% in 2018. China is Tajikistan’s single largest creditor and accounts for almost 80% of the increase in the country’s external debt between 2007 and 2016, though Dushanbe more recently tapped international markets with its debut $500mn Eurobond in 2017.
As one of China’s neighbours, Tajikistan is considered the “first leg” of some overland OBOR projects, most importantly the Central Asia-China gas pipeline (Line D). While the future of this $3bn project was thought to be in doubt, in January Tajikistan’s energy minister confirmed work had resumed on the Tajik stretch of the pipeline.
“One of the poorest countries in Asia, [Tajikistan] is assessed by the IMF and World Bank to have
a “high risk” of debt distress. Despite this, it is planning to increase its external debt, both at concessional and non-concessional rates, to pay for infrastructure investments in the power and transportation sectors, including those elements supporting OBOR,” stresses the report.
Kyrgyzstan, which also borders China, is in
a similar position, with a broad range of new Chinese funded infrastructure projects currently under discussion in addition to the gas pipeline, from the construction of a chain of hydropower plants, to the China-Kyrgyzstan-Uzbekistan railway and new roads. According to the report, “While currently considered to be at a “moderate” risk of debt distress, Kyrgyzstan remains vulnerable to shocks resulting from a sizeable exchange rate depreciation exacerbated by the scaling up of public investments.”
Sandwiched between China and Russia, Mongolia is in a “particularly difficult position” says the report, citing the need for large infrastructure investments to increase productivity and facilitate exports. “[I]f reports that Beijing expects to channel some $30bn in credit to OBOR-related projects over the next five to ten years are
true, then the prospect of a Mongolia default is extremely high, regardless of the concessional nature of the financing.”