By Rhealyn C. Pojas
Reporter
Asian Development Bank President Takehiko Nakao warned countries on May 3 to be cautious in borrowing too much money to cover infrastructure gaps.
Nakao, in a news conference during the multinational lender’s 51st annual meetings at its Manila Headquarters, said that unsustainable borrowing to fund infrastructure projects could trap borrowing countries into debts.
“We should look at debt sustainability issues very seriously,” he was quoted saying in a report.
Nakao also mentioned that China’s Belt and Road Initiative is a “key program to connect regions and broaden integration and cooperation across Asia, and that the ADB would cooperate with China when appropriate” but he reiterated that “if countries borrow too much for certain infrastructure without seriously looking at the viability and feasibility, it will bring more trouble in repayment.”
International Monetary Fund Managing Director Christine Lagarde had also previously voiced out about unsound fiscal policies.
Lagarde, during a conference in China in April, also said that the initiative could put heavier burden on countries that already have huge public debts.
“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,” Lagarde was quoted saying.
Based on a report, the Center for Global Development, a Washington-based think tank, cited that 23 countries are at risk of debt distress due to additional financing related to the Chinese infrastructure drive where eight out of these namely Laos, Maldives, Pakistan, Mongolia, Tajikistan and Kyrgyzstan are said to be of “higher concern.”