Kyrgyzstan might have some difficulties in paying its external debt to China, the deputy Akylbek Japarov said at a meeting of Kyrgyzstan's parliamentary committee on budget and finance. According to him, it may be due to unfavorable terms for Bishkek, as compared to Beijing, regarding the relevant loan agreement. "In five years Kyrgyzstan must pay off a $320 million debt to China," Japarov said, adding that Kyrgyzstan's interests were not protected, when drafting an agreement with the Export-Import Bank of China. In his opinion, the terms of repayment of loans are very short.
"The reason is that the minister of transport and other ministers visit China and discuss the terms of the loan agreements, and minister of finance joins in only when the document is being signed. The agreements note that disputes between Kyrgyzstan and China will be considered only in the arbitration court in Hong Kong, and all aspects of the case will be interpreted only in accordance with the laws of China," Japarov stressed. He noted that $300 million will be spent on servicing the foreign debt of Kyrgyzstan in the coming years. According to the Ministry of Finance, the timing of payment of Chinese loans will amount to 5 -25 years. The total debt is $1.7 billion.
Neighboring Tajikistan has already started repaying debts to China, which came to $1.2 billion. This is more than half of the republic's total external debt. Dushanbe handed over the Upper Kumarg deposit in Sughd region to Beijing to repay the debt that was needed to upgrade the Dushanbe-2 thermal power station. China's ТВЕА will develop the mine. Earlier, this company has already gained access to the Eastern Duoba deposit. According to the Central Geological Administration at the Government of Tajikistan, the Chinese company will produce gold in the deposits until it returns the funds invested in the construction of the Dushanbe-2 thermal power station, and then a new agreement on new terms will be signed.
All the noise surrounding the Kyrgyz debt has started after the Ambassador of China to Kyrgyzstan Xiao Qinghua's statement, who allegedly demanded that Bishkek pay off its debt to China. "China provides preferential loans to Kyrgyzstan, which brought much benefit to the country. There is a scheme for repaying the debt, and everything should be done according to agreements. The Chinese side does not consider other options," the local media cited the Chinese diplomat as saying.
Economist Kubat Rakhimov, speaking with Vestnik Kavkaza, said that, most likely, Mr. Xiao Qinghua's words were misinterpreted. "Being an experienced diplomat, he has an active Turkmenistan-China gas pipeline project, and he is fluent in Russian, so this person would never have spoken sharply. But in any case: first, paying debts is a normal activity, and second, there is a ministry of finance and a number of deputy prime ministers who are responsible for repaying the loan. It is profitable to shake the situation in Kyrgyzstan for certain deputies and politicians who express concern. In the conditions of political instability this is one of the tools for changing the government. Moreover, on April 27, the parliament will hear the report of the Prime Minister Sapar Isakov and decide his fate and the fate of the Cabinet of Ministers," Rakhimov said.
However, according to the expert, this does not mean that there is no problem. "The problem is that during the previous presidential term (Almazbek Atambayev, 2010-2017), the debt to China has grown 22 times higher and exceeded 40% of Kyrgyzstan's budget. This is also a problem for international lenders, who were comfortable and issued small loans. But then China came and gave the "golden chervonets." It had upset the balance of lenders. At the same time Russia behaved in an incomprehensible way, having forgiven Bishkek a debt of $240 million. I then predicted that a decrease in Kyrgyzstan's external debt by 3.8% would lead to the fact that this backlash will be used," Kubat Rakhimov noted.
Russia, according to the expert, is a "good" lender, while China is an "evil" one. However, before taking loans, one needs to assess whether they can act as a driver of the country's economic growth. Unfortunately, such unprofitable projects as Bishkek CHPP or Datka-Kemin transmission line cannot. "I calculated that these projects suspiciously cost the same - 2.5 billion yuan or $380 million. This is the maximum limit for one borrower in Exim Bank of China. That is, our authorities do not take the amount their country needs, but take what they're given. In particular, the Datka-Kemin transmission line costs $389 million, the Bishkek thermal power plant costs $386 million, the Dushanbe thermal power plant costs almost the same amount - $341 million," Rakhimov stressed.
According to the expert, Dushanbe changed its credit policy, but after its debt to China exceeded 30%, it had to pay with its gold ore fields. Now, Tajikistan proposes to implement projects via the public-private partnership (PPP). In particular, TBEA corporation, when signing a contract for the reconstruction of the Dushanbe thermal power plant, has requested the gold deposit as compensation. The Tajik authorities considered this proposal beneficial, as a double investment - in the reconstruction of the Dushanbe-2 thermal power station and in the development of deposits - and agreed. "This is a classic colonial scheme - an investment in return for resources," Kubat Rakhimov said. Under the concession scheme, the Malaysia International Trading Corporation Sdn Bhd company, in fact, there are ethnic Chinese behind this group, will build the Shurob power plant in the Sughd region of Tajikistan. They were given a huge coal deposit for 30 years. It turns out that they develop the deposit, it provides coal to the thermal power plant, generates heat and electricity. The Malaysian company returns its investments, after which starts to transfer it to the state balance. This will be the same if the tariffs do not exceed the average for the region. But if the tariffs are higher, and most likely it will be that way, then the country does not really benefit from it.
"In Kyrgyzstan, the PPP scheme is weak, so the probability of its implementation in the conditions of political instability is zero. This refers to the construction of the China–Kyrgyzstan–Uzbekistan railroad and the development of the Kara-Keche coal deposit," Rakhimov said. He believes that in the Kara-Keche deposit, the Chinese wanted to launch the scheme already tested in the Tajik Shurab - investments in exchange for a deposit.
