Home / News / World /  South Asian economies in ‘crises’, stuck between IMF and opportunist China

Sri Lanka, Pakistan, and Bangladesh are three South Asian economies in the middle of an economic crisis. While the conditions in Sri Lanka and Pakistan are alarming, Bangladesh has also approached the International Monetary Fund (IMF) as a precautionary move to depleting forex reserves, fall in production and exports, etc. One more common thing about the three economies is that as part of China's Belt and Road Initiative (BRI) and are heavily indebted to the Asian giant.

Following its expansionist policy, China is disbursing big-ticket loans to these economies on relatively easier terms. Financial incentives and corruption are also pushing these crisis-hit nations to take the easy route towards China. According to research by Observer Research Foundation (ORF), China was the largest creditor in the world lending over $1.5 trillion by 2021.

Gradually, these nations are realizing the high risks associated with Chinese debts. Let's take look a at three South Asian nations and their debt exposure-

Sri Lanka:

The country owes around $7 billion to China, which accounts for nearly 20% of its total external debts. Over time the debt burden of Sri Lanka has increased and at regular intervals, China provided the country with restructuring, haircuts, etc. to keep it indulged.

The ORF research added the differences between Sri Lanka and China intensified as Sri Lanka approached IMF for financial assistance in view of total economic collapse. China denied the requests to restructure the $4 billion loan, which was a condition from IMF (debt restructuring guarantees from its major bilateral lenders). Sri Lanka missed IMF deadlines, waiting for China's fulfilling the restructuring requests which only moved after India and Japan stepped in with a promise to restructure.


For Pakistan, the crisis is deeper as it owes around $30 billion to China which accounts for 30% of its external debts. The China-Pakistan Economic Corridor ensured that Pakistan's grave is deeper as China has invested nearly $62 billion in the country.

Similar to Sri Lanka, when Pakistan approached IMF for a $1.1 billion bailout package, China dragged its feet on restructuring the loans. China offered more financial assistance for China through various mechanisms like commercial loans, currency swaps, and loan rollovers. Pakistan is looking at a compounded debt problem and the political crises in the country will intensify the problem.


Out of the three, the safest in Bangladesh right now who owes nearly $5 billion to China and its accounts for just 7% of its total external debts. In view of depleting forex reserves, energy shortages, and falling domestic production and exports, Bangladesh has approached IMF for a stabilization package worth $4.7 billion as a “precautionary move."

Still, Bangladesh needs to be cautious while dealing with China as it is investing heavily in the country's infrastructure, energy sector, railways, etc.

China seems to be in a race with the Western economic institution and is expected to maintain good ties with these South Asian economies to balance India and western countries.








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