Djibouti City , (ANI): Djibouti, one of the countries at the heart of China’s multibillion-dollar “Belt and Road Initiative ,” is struggling under mounting financial pressure and has suspended debt repayment s to China , its main bilateral creditor, reported European Times.

The African country struggling to repay Chinese loans, has brought criticism to the Chinese model of project financing for creating dept traps for developing countries.

The International Monetary Fund (IMF) after considering the sharp projected increase in Djibouti’s external debt servicing, in late 2021, declared Djibouti’s debt as being unsustainable.

According to the same report, developing countries like Djibouti are fascinated towards China in the hope of getting funds to create vital infrastructure. But they slowly drift into the morass of unsustainable debt. According to the Boston University’s Global Development Policy Centre data, Djibouti took USD 1.5 billion from Chinese lenders between 2000 and 2020. This is a huge amount, given the limited avenues of revenue in Djibouti to repay the loans.

Chinese companies see a lot of business potential in Djibouti. These companies have an eye on the Indian Ocean rim countries like Djibouti. Many of these companies have invested in Djibouti’s maritime industry and free-trade zones. China Merchants Group has pumped money into turning the Port of Djibouti into an international business district.

Critics, however, say the Belt and Road Initiative does not help countries become self-sufficient. The model does not allow the local industries to develop, and create a sustained business. No employment opportunities are created for the citizens.

Djibouti, a net importer of food and fuel, is suffering from inflation due to soaring global oil and food prices. Inflation has pushed up, with the year-on-year rate at the end of June 2022 being 11%. The rising cost of living is pushing more people into poverty.

According to experts, Djibouti’s debts were always going to be difficult to pay, “but have become un-payable because of the impact of the Covid-19 pandemic and other economic shocks on the economy. Nevertheless, the sustainability of Djibouti’s debts was always questionable. But the pandemic further curbed its debt-servicing capacities, reported European Times.

Source: ANI