Developing nations are set to pay a record $22 billion this year, much of it tied to loans from China’s Belt and Road Initiative. However, many of these countries also owe money to private Western lenders.
But new lending is drying up. In 2025, debt repayments owed to China by developing countries will amount to $35bn. Of that, $22bn is set to be paid by 75 of the world’s poorest countries, putting health and education spending at risk, Lowy concluded.
“For the rest of this decade, China will be more debt collector than banker to the developing world,” said Riley Duke, the report’s author.
“Developing countries are grappling with a tidal wave of debt repayments and interest costs to China,” Duke said.
What did the report say?
China’s BRI, the biggest multilateral development programme ever undertaken by a single country, is one of President Xi Jinping’s hallmark foreign policy initiatives.
It focuses primarily on developing country infrastructure projects like power plants, roads and ports, which struggle to receive financial backing from Western financial institutions.
The BRI has turned China into the largest global supplier of bilateral loans, peaking at about $50bn in 2016 – more than all Western creditors combined.
According to the Lowy report, however, paying off these debts is now jeopardising public spending.
“Pressure from Chinese state lending, along with surging repayments to a range of international private creditors, is putting enormous financial strain on developing economies.”
