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China's Belt And Road Should Focus On Debt Sustainability, Warns IMF's Lagarde

China's Belt And Road Should Focus On Debt Sustainability, Warns IMF's Lagarde
In a critical analysis of the Belt and Road infrastructure program of China, International Monetary Fund Managing Director Christine Lagarde said on Friday that this huge project should be taken to such places where it is needed and to those places where the debt that the project generates is sustainable.
Lagarde was addressing a gathering of almost 40 leaders and other high-ranking officials from participating countries in the project in Nejing during the China’s second Belt and Road summit. She noted that there was a positive impact on growth in certain countries because of the construction projects of ports, railroads and other trade-enhancing infrastructure. She however also issued a warning of the need for careful management of the projects.
Better risk assessment in project selection, process of competitive bidding that is open and transparent and enhanced transparency should be included in the revamped “Belt and Road 2.0” program, she said.
 “History has taught us that, if not managed carefully, infrastructure investments can lead to a problematic increase in debt,” Lagarde said in remarks prepared for delivery at the conference. “I have said before that, to be fully successful, the Belt and Road should only go where it is needed. I would add today that it should only go where it is sustainable, in all aspects.”
A new debt sustainability framework that had been prepared and is being implemented by Chinese authorities for project evaluation were identified to be positive steps on the part of the Chinese authorities, Lagarde said.
While China has been active to boil down concerns and fears of it saddling poor countries with debts they cannot repay through its Belt and Road project aimed to increase trade links, it also announced this new sustainability initiative on Thursday.
At the Beijing conference, Laragde also applauded the implementation of the green investment principle for Belt and Road projects which seeks to achieve lesser carbon emissions and ensure climate resilient investments.
The initiative must underpin environmental protection “to protect the common home we live in”, Chinese president Xi Jinping said in a keynote speech on Friday at the conference. “Operate in the sun and fight corruption together with zero tolerance,” Xi said. “Building high-quality, sustainable, risk-resistant, reasonably priced, and inclusive infrastructure will help countries to fully utilize their resource endowments,” he added.
“Debt sustainability and green sustainability will strengthen BRI sustainability,” Lagarde said.
New global supply chains were being developed and investments in infrastructure were being stimulated because of the Belt and Road initiative, said the IMF chief.  She also cited a couple of examples of this. She mentioned how strong growth was seen because of the construction of a highway in Senegal that is now linking three cities to the main airport of the country and the construction of a new manufacturing zone in Kazakhstan related to the Belt and Road project.

Christopher J. Mitchell

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