Mon, 12 Apr 2021

Faced with a struggling economy and few financial lifelines, Kyrgyzstan is feeling the weight of its swelling state debt -- a significant proportion of which is owed to China -- and considering some drastic measures to meet its obligations.

Kyrgyzstan's foreign debt is reportedly as much as $5 billion and more than 40 percent of that ($1.8 billion) is owed to the Export-Import Bank of China for a series of infrastructure projects over the last decade under the guise of the Belt and Road Initiative (BRI), Chinese leader Xi Jinping's signature foreign policy project.

Bishkek, however, is grappling with a contracting economy whose gross domestic product dropped 8.6 percent in 2020, prompting fears the country will be unable to pay off its loans or even meet interest payments, especially on the Central Asian country's commitments owed to Beijing.

With deadlines approaching, there has been discussion by Kyrgyz officials of potentially forfeiting assets as a form of repayment.

"If we do not pay some of [the debt] on time we will lose many of our properties," new Kyrgyz President Sadyr Japarov told the state Kabar news agency during an interview on February 13. "Agreements with such conditions were signed by [President Almazbek] Atambaev. But, God willing, we will get rid of all debts in time. There are plans."

What exactly those plans are remains to be seen.

While Japarov's comments refrained from mentioning China directly, the national conversation has since shifted to how the country of 6.4 million people can repay its loans to Beijing, its largest creditor and a major political force in Central Asia.

This debt impasse highlights the difficult bind that many countries -- including Kazakhstan, Tajikistan, and Pakistan -- have with Chinese-owed debts from large BRI infrastructure projects as they deal with the economic crunch caused by the COVID-19 pandemic.

Beijing has so far shown a willingness to defer some loans, but not offer outright relief, pointing toward a difficult negotiating environment for countries like Kyrgyzstan that are under such difficult financial strain.

"China has shown many times in Latin America and Africa that it is not a charity and that it is a very pragmatic partner in terms of getting back its debts," Temur Umarov, an expert on China-Central Asia relations at the Carnegie Moscow Center, told RFE/RL. "For Kyrgyzstan, it's a challenging situation with no clear way out."

Kyrgyzstan has been considering options for the development of its Jetim-Too iron-ore mine in recent months, and some government critics have raised the prospect that the authorities might sell off or surrender mining rights to the lucrative deposit to pay off its loans to Beijing.

As a presidential candidate, Japarov himself floated the idea of using Jetim-Too to pay down state debt owed to China, although Kyrgyzstan's National Bank has said the government planned to retain ownership.

Beyond mineral and mining concessions, some lawmakers have also mentioned the possibility of the government surrendering partial management of the country's energy sector.

A protest outside the Chinese Embassy in Bishkek over the treatment of the Uyghur minority in China.

This outcome to resolve the country's debts was raised by parliamentarian Akyl Japarov (no relation to the president) on February 22, if Kyrgyzstan could not meet its interest payments on the controversial, Chinese-financed reconstruction of Bishkek's main power plant, the cost of which was grossly inflated before breaking down and continues to have shortfalls in production.

"Kyrgyzstan has no leverage and few ways to manage this crisis," Niva Yau, a researcher at the OSCE Academy in Bishkek, told RFE/RL. "A lot will depend if Japarov is able to follow through on his reforms for the economy and bring in anti-corruption measures."

In Search Of Goodwill

Japarov and Xi had their first phone call on February 22, during which the Kyrgyz president voiced support for more Chinese projects in the country and praised Xi's handling of a range of international issues.

The phone call comes after strained relations between Bishkek and Beijing around the events that brought Japarov to power and plunged Kyrgyzstan into a political crisis in October.

The nationalist Japarov rode into power on protests triggered over parliamentary elections that toppled the government and saw the resignation of President Sooronbai Jeenbekov.

But in the wake of those events, Chinese businesses and citizens in Kyrgyzstan reportedly faced attacks and shakedowns, which led to Kyrgyz Ambassador to China Kanayym Baktygulova being summoned in Beijing as Chinese officials expressed their displeasure and concern for the safety of its citizens.

WATCH: Countries On China's 'New Silk Road' Face Coronavirus Fears

Copyright (c) 2018. RFE/RL, Inc. Republished with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Ste 400, Washington DC 20036

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