As India Warns Of 'Vicious Debt Trap Cycle', Here Is What Debt Trap Diplomacy Means

The international community should be vigilant towards the dangers of unsustainable financing, which leads to a vicious cycle of debt traps, said India at the UN Security Council open debate held on Monday under China's Presidency of the 15-nation UN body for November.?

This was construed as an apparent reference to China, which the West accuses of "debt trap" diplomacy.?

What is "debt trap" diplomacy??

"Debt trap diplomacy" is a term used to describe a situation where a powerful lender, often a government or state-owned enterprise, extends excessive credit to another country with the intention of gaining strategic or economic advantages when the borrower is unable to repay the debt.?

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Why is China associated with 'debt trap diplomacy'? - Hambantota port issue explained?

One of the most commonly cited examples of debt trap diplomacy involves the Hambantota port, a project in Sri Lanka under China's Belt and Road Initiative (BRI).?

China had provided huge financial assistance to Sri Lanka for constructing the Hambantota Port located on the island's southern coast. However, Sri Lanka accumulated a substantial amount of debt that it could not repay.?

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In 2017, Sri Lanka agreed to a debt-to-equity swap with a Chinese state-owned company. As part of the deal, the Hambantota port was leased to Beijing in a 99-year debt-for-equity swap.?

The Hambantota port, a project under BRI funded by a Chinese loan, was leased to Beijing in a 99-year debt-for-equity swap in 2017 after Sri Lanka failed to pay off the debt.?

This raised concerns about sovereignty and control over a strategic asset being transferred to a foreign entity.?

So, it is believed that China is attempting to burden countries with heavy debt and ultimately seize their strategic assets when they cannot repay.?

How the 'debt trap diplomacy' notion has been criticised?

Most criticisms of debt trap diplomacy emphasise the role of the borrowing country in recklessly borrowing beyond their ability to repay. This squarely puts the responsibility for being debt-trapped on the borrowing country.?

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Some perceive debt trap diplomacy as a propaganda of the West that seeks to avert other countries from having closer ties with China, according to a?Journal of the Indian Ocean Region paper.? ? ? ??

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