For over a decade, China’s Belt and Road Initiative (BRI) has been promoted with great fanfare as a gateway to economic growth for developing countries. But behind the shimmering promises lies a trail of financial disasters and lost sovereignty. Nations like Kenya and Sri Lanka have faced severe economic crises due to unsustainable Chinese loans, leading to sovereign defaults and forfeiture of national assets.

Launched in 2013, the BRI was introduced as a grand plan to enhance land and maritime connectivity, linking China with Asia, Europe, and Africa. Through investments estimated at nearly one trillion dollars, the initiative was presented as a means to bridge infrastructure gaps, promote globalization’s final frontiers, and raise China’s global status by pushing for a multipolar world order.

But the reality was more cautionary than hopeful. An investigative study into BRI-related funding examined how it affected participating countries. The findings were alarming—10 to 15 nations were at risk of financial distress, with eight countries flagged for serious concern: Djibouti, the Kyrgyz Republic, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan.

Among them, the Maldives stands on the brink of an economic storm, overwhelmed by debt, falling foreign exchange reserves, and looming repayment deadlines that threaten to erode its economic independence. The pattern was repeating—China’s loans often came wrapped in strings that nations couldn’t untangle.

The Debt Trap Beneath the BRI Glimmer

In the early days of the Belt and Road Initiative, it seemed China was scripting a new development model for the world. Large-scale infrastructure projects captured global attention. The numbers dazzled, the ambition was praised, and headlines were filled with news of multibillion-dollar deals across continents.

But a deeper look showed that many of these investments were made in countries with “junk” credit ratings—a major red flag. Yet China pressed on, striking massive agreements with Pakistan, Sri Lanka, and Malaysia, placing size and speed over caution and accountability. Transparency was low, and the consequences soon emerged.

Kenya: When Infrastructure Turns into Liability

Kenya, a key East African transport hub and the region’s economic engine, became a major participant in China’s BRI. Projects like the Nairobi Motorway, the Standard Gauge Railway (SGR), and the Eldoret Special Economic Zone (ESEZ) promised a development leap.

However, the price tag was steep. Kenya borrowed $1.6 billion from China to build the Nairobi–Naivasha SGR segment at an annual interest rate of 2%. According to the loan agreement, “42% of all profits would be utilised to repay the loan.” What’s more, the terms locked Kenya into buying goods from China using proceeds from the railway: “Kenya must approach China first if it wishes to purchase goods with the proceeds from the rail network.” Whether the SGR made profits or not, China was the sole beneficiary. If the SGR failed to earn, Kenya still had to repay. If it succeeded, China reaped the rewards.

Local Kenyan businesses, meanwhile, saw almost no benefit. Chinese companies avoided subcontracting to Kenyan firms, resulting in just 0.9% of the 1.31 billion shillings from the Kisumu-Mamboleo road project reaching local hands.

Kenya’s debt figures are staggering. Chinese loans now account for 67% of the country’s external debt, contributing to a national debt of $82 billion, a record high. The loan amount surged further with the $1.4 billion Naivasha Inland Container Depot extension, taking Kenya’s total BRI-related debt to $5 billion. In June 2022, China imposed an $11 million fine on Kenya for missing railway loan payments.

Sri Lanka: The Cost of a Port and a Century-Long Lease

Sri Lanka’s situation remains the most cited example of China’s debt diplomacy. The case centers around Hambantota Port, a grand project backed by then-President Mahinda Rajapaksa, envisioned to convert a small fishing village into a strategic shipping center on the country’s southern coast.

The plan heavily relied on Chinese funding. But when Sri Lanka failed to meet loan repayment obligations, it had to surrender control. In 2017, Sri Lanka handed China a majority stake in the port along with a 99-year lease.

China’s state news agency celebrated the moment, tweeting: “Another milestone along path of #BeltandRoad.”

But back home, it was chaos. In February 2018, Sri Lanka’s auditor general admitted that he could not accurately estimate the nation’s public debt. The lack of transparency in evaluating contracts, payments, and project proposals had taken its toll. As public scrutiny grew, so did demands for more open governance and accountability in how these deals were structured and executed.

Laos: Behind the Tracks of Progress Lies the Power of Control

Laos presents a telling example of how China’s growing influence takes hold under the guise of infrastructure development. In a push to modernise its long-neglected public systems, the Lao government launched an ambitious project—the $6 billion Boten–Vientiane railway, which aims to seamlessly connect the landlocked country to China. This megaproject was mainly funded by Beijing, with the Export-Import Bank of China again playing a crucial role.

But infrastructure wasn't all China secured. “In 2020, amid efforts to restructure its debt, China acquired a 90% share in Électricité du Laos Transmission Company, which is in charge of Laos’ electrical grid.” This wasn’t just about business—it handed Beijing strategic control over Laos’ entire power network, including the frightening possibility of halting electricity to domestic users.

Research from the Lowy Institute highlighted that China’s unprecedented lending could be leveraged for “political leverage,” especially after the U.S. government reduced its foreign aid under the Trump administration. During this time, China poured funds into countries like Honduras, Nicaragua, the Solomon Islands, Burkina Faso, and the Dominican Republic, most notably after these nations switched diplomatic recognition from Taiwan to Beijing—revealing a clear geopolitical pattern.

Unlike Sri Lanka, Laos has not approached the International Monetary Fund (IMF) for structured relief. Instead, Beijing and Vientiane seem to be opting for an “extend and pretend” method—pushing back repayment timelines without publicly admitting the failures of the so-called “China model.” This move may delay economic fallout, but experts fear it “could cost the country’s citizens a decade or more” in lost development and financial security.

Maldives: Caught in the Current of Unsustainable Chinese Loans

The Maldives is another island nation struggling under mounting debt—and China is once again at the center. As of June 2023, the Maldives Finance Ministry reported that the Export-Import Bank of China held 25.2% of the nation’s external debt, making it the largest single lender. The International Monetary Fund (IMF), though not naming China directly, flagged the Maldives as being “at high risk of external and overall debt distress” unless “significant policy changes” were introduced.

The ground reality is bleak. As of December 2024, the Maldives Monetary Authority had less than $65 million in usable foreign exchange reserves—a dangerously low cushion for a country that depends heavily on imports and tourism.

Amid this crisis, President Muizzu traveled to China, where he signed over 20 memorandums of understanding (MoUs) and pleaded for debt restructuring and fresh financial support. China responded with a $130 million package to maintain the Sinamale Bridge and enhance roads in Malé and Vilimalé. However, despite these gestures, China has yet to deliver on its promise of a five-year grace period—even a full year after Muizzu took office. Worse still, Beijing now warns that restructuring debt might make it even harder for the Maldives to access new loans.

India: Lending a Hand, Not a Trap

Amid the growing influence of China, India has emerged as a dependable partner, using its “Neighbourhood First” policy to offer timely support to the Maldives. Over the past two years, New Delhi has provided grants, bond purchases, infrastructure aid, and currency swaps—all tailored to give the Maldives real breathing room.

A major example of this support was two currency swaps worth $757 million, which helped the Maldivian economy survive critical shocks. India’s $800 million line of credit continues to power several key developments: a new international airport in the north, a bridge and road project in the south, large housing projects in Malé, and a new bridge connecting Malé to its western suburbs.

India’s engagement doesn’t stop at construction. In May 2025, India rolled over payments of a USD 50 million treasury bill, offering a second-year extension. This quiet but powerful financial backing allows the Maldives to pursue reforms without becoming further dependent on Beijing.

India’s presence also strengthens regional security. With projects to enhance coastal surveillance and maritime cooperation, New Delhi ensures no foreign power dominates this strategic ocean corridor. India’s impact is organic and people-focused, helped by the fact that it is one of the top tourist destinations for Maldivians, offering not just economic relief but cultural familiarity—unlike China’s cold, transactional diplomacy.

The Way Forward: Choosing Trust Over Traps

India’s approach to regional development is strategic yet thoughtful. From the $400 million RBI currency swap to major projects like the Greater Malé Connectivity Project, India’s assistance is rooted in trust and long-term vision. This stands in sharp contrast to China’s model, which often prioritizes high-interest loans over the wellbeing of local communities.

As the Indian Ocean becomes a hotspot for geopolitical contests, the Maldives must reflect on its choices. The story of Sri Lanka’s Hambantota Port, leased to China for 99 years due to an unpaid loan, serves as a grim warning. As Ernest Hemingway once wrote, “one becomes bankrupt in two stages: gradually, and then suddenly.” Many of these seemingly helpful projects hide steep costs and vague conditions that can lead to national surrender rather than progress.