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International relations

Japan seeks G-20 push for transparency on emerging-country debt

Heavy infrastructure loans fuel debt risks for vulnerable economies

A construction worker looks at the China-funded Sinamale Bridge in the Maldives. Many countries along historic Silk Road trade routes face growing debt tied to Beijing's Belt and Road infrastructure initiative.   © Reuters

TOKYO -- Japan will push both lenders and borrowers to disclose more information regarding debt in emerging economies as the country chairs the Group of 20 next year, hoping to prevent such nations from falling into a debt trap.

Emerging economies in Asia and Africa have been developing their infrastructure in recent years with backing from China's Belt and Road Initiative. Beijing poured a total of $20.1 billion into 64 countries along historic Silk Road trade routes in 2017, up 32% from the year before. Eight of those nations, including the Maldives and Laos, will face growing debt risks as a result, according to the Center for Global Development, a nonprofit think tank based in the U.S.

Some already have paid a steep price. Sri Lanka, struggling to repay debt, handed over operations of the island's Hambantota port to a Chinese state-run company in 2017 on a 99-year lease. Pakistan exhausted much of its foreign reserves to pay for a surge in imports tied to infrastructure projects.

As the host of the G-20 meeting for finance ministers and central bankers, Japan intends to urge lenders and borrowers to disclose the size, interest rates and conditions on loans to emerging countries so the information can be compiled into one data set. Currently, even the borrowers themselves often lack a clear idea of how much debt they face.

Japan also advocates responsible lending practices, like ensuring that borrowers have the ability to repay the loans in question. Tokyo wants G-20 members to agree on promoting economic growth and sustainability in infrastructure projects.

Asia needs to build $26 trillion in infrastructure between 2016 and 2030 to maintain growth momentum, the Asian Development Bank says. Japan could compete for these projects more easily if the G-20 major economies -- which include China -- reach a consensus on lending standards.

Debt in emerging economies also became a topic at the Asia-Pacific Economic Cooperation meetings that began Thursday. The bloc has issued a new guidebook on infrastructure investment urging member countries to consider the transparency and financial soundness of each project.

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