ADB head issues cautionary message to Beijing’s borrowers

NADI – The Philippines may not be in danger of falling into a Chinese debt trap, but the head of the Asian Development Bank (ADB) sounded a cautionary note yesterday on Chinese loans.

ADB president Takehiko Nakao told a press conference in this Fijian city that China faces “debt issues” related to its Belt and Road Initiative (BRI), which supports mostly infrastructure development.

Responding to a question on the BRI, Nakao said it was “a very natural idea” for China to expand the connection from East to Central Asia and on to Africa. He noted that there is a “long tradition” in this initiative that dates back to China’s Han Dynasty some 2,000 years ago.

“But at the same time, we have to be careful that we find good projects with good returns,” Nakao said, adding that the projects should not cause “repayment problems” or incur steep social costs.

He noted that “there are many debt issues related to the BRI.”

“I think the Chinese should also pay attention to these issues,” Nakao said.

Last Wednesday, ADB chief economist Yasuyuki Sawada told a press briefing here that as long as debts are sustainable, “having debt per se is not necessarily a bad idea.”

Sawada said that while the ADB is keeping an eye on China-funded projects in the Philippines, at this point there is no reason to fear that the country could fall into a Chinese debt trap.

The ADB is also lending to China, with a focus on projects related to climate change resilience and other environmental issues, Nakao said yesterday.

He said debt issues should be avoided, with the repayment capacity of borrowers given careful consideration.

The ADB currently has 16 projects with $3.3 billion in funding in the Philippines. Apart from infrastructure such as roads and bridges, the Manila-based multilateral lender is providing funding for the rehabilitation of Marawi, life-skills training in 35 local government units to assist over 17,500 out-of-school youths gain employment, and policy reforms to expand financial services.