A dozen poor countries are facing economic instability and even collapse under the weight of hundreds of billions of dollars in foreign loans, much of them from the world’s biggest and most unforgiving government lender, China. fortune.com
An AP analysis of a dozen countries most indebted to China — including Pakistan, Kenya, Zambia, Laos and Mongolia — found paying back that debt is consuming an ever-greater amount of the tax revenue needed to keep schools open, provide electricity and pay for food and fuel.
China’s reluctance to forgive debt & its extreme secrecy about how much money it has loaned & on terms has kept other major lenders from stepping in to help..borrowers required to put cash in hidden escrow accounts that push China to the front of the line of creditors to be paid.
In Pakistan, millions of textile workers have been laid off because the country has too much foreign debt and can’t afford to keep the electricity on and machines running.
Kenya has held back paychecks to thousands of civil service workers to save cash to pay foreign loans.
Kenya has held back paychecks to thousands of civil service workers to save cash to pay foreign loans.
Since Sri Lanka defaulted a year ago, a half-million industrial jobs have vanished, inflation has pierced 50% and more than half the population in many parts of the country has fallen into poverty.
A few months after Zambia defaulted, researchers found that it owed $6.6 billion to Chinese state-owned banks, double what many thought at the time and about a third of the country’s total debt.
China started setting up shell companies for some infrastructure projects and lent to them instead, which allowed heavily indebted countries to avoid putting that new debt on their books. When these projects go bad, what was advertised as a private debt becomes a public debt
Beijing has taken on a new kind of hidden lending..lending tens of billions of dollars through what appear as ordinary foreign currency exchanges. China’s swaps mimic loans by lasting years & charging higher-than-normal interest rates. they don’t show up on the books as loans
You’ve got a growing number of countries that are in dire financial straits.Somehow they’ve managed to do all of this out of public view. So unless people understand how China lends, how its lending practices work, we’re never going to solve these crises
🧵fortune.com
🧵fortune.com
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