IMF Managing Director Christine Lagarde urged China to prevent its “Belt and Road” infrastructure plan from becoming a boondoggle that drives up debt in the region.
“The first challenge is ensuring that Belt and Road only travels where it is needed,” Lagarde said, according to prepared remarks of a speech Thursday in Beijing. “With any large-scale spending there is sometimes the temptation to take advantage of the project selection and bidding process. Experiences from across the globe show that there is always a risk of potentially failed projects and the misuse of funds.”
China has been ramping up its Belt and Road initiative, which would build a modern-day Silk Road stretching from Asia to Africa and Europe. Since President Xi Jinping announced the project about five years ago, billions of dollars of Chinese investment has been committed to build railways, roads, ports and power plants.
Xi has touted the plan as a way to foster development and economic integration. But critics have questioned the project’s financial viability and expressed concern about Beijing’s push to spread its influence west.
“We’re concerned about China’s growing lending on the One Belt, One Road around the world,” U.S. Treasury Secretary Steven Mnuchin said Wednesday in Washington, referring to another name for the Chinese initiative. “We’re concerned in certain areas where countries can’t necessarily afford the loans.”
The Belt and Road project risks saddling eight countries with unsustainable debts, including Pakistan and Mongolia, according to a study last month by the Center for Global Development in Washington.
“In countries where public debt is already high, careful management of financing terms is critical,” Lagarde said. “This will protect both China and partner governments from entering into agreements that will cause financial difficulties in the future.”
She urged China to improve the transparency of its decision making on the project, such as by creating a “one-stop shop” that provides information to stakeholders.