Nepal’s economic ties with China raise concerns about ‘debt trap diplomacy’

China's ambition to establish its dominance in the South Asian region has been a long-standing strategy. 

As per a report by the Nepalese daily Pardafas, China, which is rooted in the "Middle Kingdom" complex, is using tactics to achieve its objectives by trapping Nepal in a debt cycle. 

The recently inaugurated Pokhara International Airport was funded by a loan of USD 215 million from the Chinese EXIM Bank, which has imposed unfavourable terms on Nepal's economy.

The interest rate on this loan is 2%, significantly higher than those offered by other multilateral lenders like the World Bank and Asian Development Bank (ADB), which typically charge between 0.25% to 0.75%. 

Additionally, unlike these institutions, which allow repayment terms of up to 40 years, the Chinese loan must be repaid within a maximum of 15 to 20 years.

China has been investing heavily in Nepal's infrastructure, leading to the country's growing reliance on Chinese financing.

These actions are consistent with China's debt trap diplomacy, as seen in other countries like Sri Lanka and Pakistan.

Reports have shown that China has been implementing its malicious strategy of trapping countries in a debt cycle and disregarding their deteriorating economic situation. 

China became Sri Lanka's largest source of foreign direct investment (FDI) and development aid between 2005 and 2015. By investing in multiple mega infrastructure projects in Sri Lanka, China aimed to establish a strategic advantage in the Indian Ocean region and counter India's influence in South Asia. 

Sri Lanka has an outstanding debt of over USD 8 billion to China, which includes loans from the Chinese Development Bank. 

Meanwhile, Nepal can adopt various measures to reduce the risk of falling into a debt trap with China.

Firstly, Nepal can diversify its sources of funding by seeking financial assistance from other countries and international organizations. Secondly, Nepal can renegotiate its existing loans with China to reduce the interest rates and extend the repayment period. 

Thirdly, Nepal can improve transparency and accountability in the projects financed by China to ensure that they are beneficial to the Nepalese people.

(With inputs from ANI)