The newly-elected president of the Maldives said that the country’s recent borrowing spree from Chinese lenders has left state finances in a “precarious” situation, while other creditor nations are also feeling squeezed following heavy investment led by Beijing, Reuters reports.
“The damage done due to projects conducted only for political reasons, and at a loss, are huge,” said President Ibrahim Mohamed Solih in a speech. His staff have estimated that the Maldives owes $1.5 billion to China – already over a quarter of the country’s GDP – but fear the real figure could be much higher.
Pacific Island nation Tonga also announced it will join China’s Belt and Road Initiative, earning a reprieve from the Chinese government just before a wave of loans were due to mature.
Tonga’s debt to China is now over $115 million, equalling roughly one-third of its GDP. Seven other nations in the region are also in debt to China on a similar scale.
Chinese officials this weekend refuted longstanding claims that overseas loans were being used as a form of “debt diplomacy.” Foreign Ministry spokeswoman Hua Chunying said that “no developing country will fall into debt difficulties because of cooperation with China.”