Claims of a Chinese debt trap in Maldives “a political tool”

Claims of China’s debt trap in the Maldives is fiction and a political tool, says the country’s ambassador.

Zhang Lizhong made the claim via Twitter, where he shared his opinions on the “debt issue” through videos.

Responding to reports that China is seeking land or island as a compensation for failure to repay debt, the Chinese ambassador said that this is “fiction” created as “a political tool.”

Lizhong stressed that cooperation between Maldives and China is “a typical example of mutual benefit,” and stressed that it is “not a case of one side deciding all the issues or one side taking advantage of the other.”

Noting that such accusations are attempts to “disrupt the mutual beneficial cooperation between China and other developing countries,” Lizhong stressed that China has “never pressed any country in difficulty for debt repayment.”

He said that such issues of failure to repay will be “properly resolved through friendly consultation of the two sides, in accordance with agreements and international [best] practices.”

Ambassador Lizhong also described the debt trap claims as an attempt to the disrupt China’s Belt and Road Initiative, which he noted has proven to be beneficial to developing countries.

While the entire world faces the economic downturn of the Covid-19 pandemic, Maldives is no exception. And while the country had already been facing issues in repaying debts to bilateral partners, the pandemic hit the island nation hard.

Noting the “unexpected Covid” pandemic’s financial impact on Maldives, Lizhong said that while the country had previously established a strategy to pay the loans, that it now needs to be adjusted after reviewing the exact impacts of the virus.

The ambassador highlighted that the Maldivian foreign minister had noted that this during an interview, as well as that he has received similar messages from other government officials.

Lizhong further emphasized that after taking the economic impacts of Covid-19 in the Maldives into account, that China has already implemented the G20 Debt Service Suspension Initiative for Maldives; G20 (or Group of Twenty) is an international forum for the governments and central bank governors from 19 countries and the European Union (EU) who back in April, agreed on a coordinated approach for a suspension of debt service payments for the world's poorest countries starting on May 1 until the end of the year.

The ambassador said that the the debt suspension was offered to the Maldives because China understands the difficulties faced by the country.

While the G20 Debt Service Suspension Initiative is for bilateral official sovereign loans, Lizhong noted that the two sides are currently in discussions regarding commercial loans with sovereign guarantees.

The ambassador said that China encourages Chinese financial institutions “to conduct consultations directly with their partners on repayment arrangements for commercial loans.” adding that he believes that the the ongoing dialogues “will bring good results.”