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A Framework to Assess Debt Sustainability and Fiscal Risks under the Belt and Road Initiative

Author

Listed:
  • Bandiera,Luca
  • Tsiropoulos,Vasileios
Abstract
This paper provides a framework to assess the impact of infrastructure investment expected under the Belt and Road Initiative (BRI) on the debt vulnerabilities of countries that are located on BRI transport and connectivity corridors in the absence of comprehensive and consistent information on investments and financing terms. Key assumptions relate to the amount of public and publicly guaranteed (PPG) debt financing and its terms, the size and sectoral type of identified BRI investment, and the expected impact of growth in the medium and long term of that investment. BRI debt financing is expected significantly increase PPG debt in a number of countries. The paper provides estimates for both the medium and the long term. In the medium term, defined as the period 2019-2023, debt financing of BRI investment is expected to be fully disbursed while the full growth impact of BRI related infrastructure is not entirely realized. In this initial phase, around one-third of assessed BRI-recipient countries are estimated to face elevated debt vulnerabilities post- BRI, several of which have already high debt vulnerabilities. The impact of BRI on public debt would improve over the longer term under the assumption of a sustained negative interest rate-growth differential and in the absence of the materialization of BRI related fiscal risks. Still, debt to GDP ratio is expected to remain higher in one-third of countries (11 out of 30 with available data).

Suggested Citation

  • Bandiera,Luca & Tsiropoulos,Vasileios, 2019. "A Framework to Assess Debt Sustainability and Fiscal Risks under the Belt and Road Initiative," Policy Research Working Paper Series 8891, The World Bank.
    • Handle: RePEc:wbk:wbrwps:8891
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    Citations

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    Cited by:

    1. Klaus Friesenbichler & Birgit Meyer, 2023. "Entwicklungspolitik als geoökonomisches Instrument. Eine Einordnung vor dem Hintergrund globaler Trends," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(11), pages 793-804, November.
    2. Horn, Sebastian & Reinhart, Carmen M. & Trebesch, Christoph, 2021. "China's overseas lending," Journal of International Economics, Elsevier, vol. 133(C).
    3. de Soyres, François & Mulabdic, Alen & Ruta, Michele, 2020. "Common transport infrastructure: A quantitative model and estimates from the Belt and Road Initiative," Journal of Development Economics, Elsevier, vol. 143(C).
    4. World Bank, 2020. "South Caucasus and Central Asia - The Belt and Road Initiative," World Bank Publications - Reports 34118, The World Bank Group.
    5. World Bank, 2020. "South Caucasus and Central Asia - The Belt and Road Initiative," World Bank Publications - Reports 34122, The World Bank Group.
    6. Michel Aglietta & Guo Bai & Camille Macaire, 2021. "The 14th Five-year Plan in the New Era of China’s Reform Asian Integration, Belt and Road Initiative and Safeguarding Multilateralism," CEPII Policy Brief 2021-36, CEPII research center.
    7. Aggarwal, Aradhna, 2020. "The Concept, Evolution, Impacts and Critical Success Factors of Regional Economic Corridors," MPRA Paper 110706, University Library of Munich, Germany, revised 16 Nov 2021.
    8. repec:bre:bebook:45816 is not listed on IDEAS
    9. World Bank, 2020. "South Caucasus and Central Asia - The Belt and Road Initiative," World Bank Publications - Reports 34121, The World Bank Group.
    10. Alvin Camba, 2020. "The Sino‐centric Capital Export Regime: State‐backed and Flexible Capital in the Philippines," Development and Change, International Institute of Social Studies, vol. 51(4), pages 970-997, July.
    11. Wifo, 2023. "WIFO-Monatsberichte, Heft 11/2023," WIFO Monatsberichte (monthly reports), WIFO, vol. 96(11), November.

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