Djibouti suspended debt payments to China, its main bilateral creditor, according to the World Bank . The African country has criticized the Chinese model of project financing for creating dept traps for developing countries .
Djibouti City (Djibouti), December 12: According to the World Bank, Djibouti, one of Chinas multibillion-dollar Belt and Road Initiative's main bilateral creditor, is under mounting financial strain and has suspended debt payments to China, its main bilateral creditor, according to the World Bank.The African country struggling to repay Chinese loans has criticized the Chinese model of project financing for creating dept traps for developing countries.A further increase to USD 266 million has been predicted for 2023, according to the International Monetary Fund (IMF), who has rated Djiboutis debt as unsustainable in late 2021.China's Djibouti investment is also being considered as a great example of military expansionism and strategic thinking.According to a survey by the European Times, Djibouti's strategic location on the Horn of Africa's Bab-el-Mandeb Strait, which provides access to the Red Sea and the Suez Canal, has made it a top destination for Chinese capital, particularly in the maritime and free-trade zones.But they slowly drift into the sluggish state of unsustainable debt.Djibouti borrowed USD 1.5 billion from Chinese lenders between 2000 and 2020, according to data from the Boston University Global Development Policy Center.Given the limited income sources in Djibouti, this is a significant sum. These firms are particularly interested in the Indian Ocean rim countries such as Djibouti.Many of these firms have invested in the maritime industry and free-trade areas in Djiboutis.The Belt and Road Initiative, according to critics, has failed to aid countries in becoming self-sufficient.The scheme does not allow the local economies to prosper and grow into a flourishing industry. The inflation rate has risen, with it topping 11% year on year at the end of June 2022.More people are living in poverty as a result of the Covid-19 pandemic and the Ukraine war.Djibouti's debts have always been burdened by economic shocks, but they have now become unpayable due to the impact of the Covid-19 pandemic and other economic shocks.Nevertheless, the stability of Djiboutis debts was always uncertain.However, the pandemic had short-circuited its debt-servicing abilities, according to the European Times. Zambia became the first African country to default on some of its debts in 2020.Kenya and Ethiopia are also being subjected to the pressure.