China has had a long-standing plan to consolidate its supremacy in the South Asian area.
According to a story by the Nepali newspaper Pardafas, the “Middle Kingdom”-affiliated China is using strategies to accomplish its goals by entangling Nepal in a spiral of debt.
An unfavorable loan of USD 215 million from the Chinese EXIM Bank, which has put unfavorable conditions on Nepal’s economy, was used to finance the newly opened Pokhara International Airport.
This debt has a 2% interest rate, which is considerably greater than the 0.25% to 0.75% range charged by other international lenders like the World Bank and Asian Development Bank (ADB).
The Chinese debt must also be returned within a maximum of 15 to 20 years, as opposed to these organizations’ 40-year maximum payback conditions.
China has made significant building investments in Nepal, which has increased its dependence on Chinese funding.
These actions are in line with China’s debt trap policy, which has been observed in nations like Pakistan and Sri Lanka.
According to reports, China has been employing its nefarious strategy of entangling nations in a circle of debt while ignoring their worsening economic conditions.
Between 2005 and 2015, China overtook the US as Sri Lanka’s top provider of Capital and economic assistance. China sought to create a geopolitical edge in the Indian Ocean area and compete with India’s dominance in South Asia by spending in numerous major infrastructure projects in Sri Lanka.
Over USD 8 billion in unpaid debt to China, including loans from the Chinese Development Bank, is owed by Sri Lanka.
Nepal can take a number of actions in the interim to lessen the possibility of getting caught in a debt cycle with China.
First, by requesting financial aid from other nations and foreign groups, Nepal can broaden its financing sources. The second option is for Nepal to revise its current debts with China in order to lower the interest rates and lengthen the payback schedule.
Lastly, Nepal can increase responsibility and openness in initiatives funded by China to make sure they benefit the Nepali people.