Why loan from China under BRI may bring down KP Oli govt in Nepal

Is the KP Sharma Oli-led government in Nepal in trouble?

Ahead of Oli’s visit to China, Nepal’s ruling parties are going at it over Beijing’s Belt and Road Initiative.

While Oli’s Communist Party of Nepal- Unified Marxist Leninist (CPN-UML) party wants to go ahead with the loan from China, the Nepali Congress led by Sher Bahadur Deuba seems adamantly against it.

Oli, ahead of the China visit, struck an upbeat note.

“I am embarking on a visit to China on December 2 and it will not just be a tour to a foreign country,” Oli said. “You will know by yourself how the visit became successful after I return home.”

But what do we know about the row?

Let’s take a closer look:

Oli’s CPN-UML pushes BRI

First, let’s briefly examine Oli’s upcoming trip. 

As per The Print, this will be Oli’s first foreign visit since taking office.

Nepal’s foreign minister Arza Deuba is heading to China today ahead of the trip, as per Indian Express.

Dueba, the wife of Nepali Congress leader Sher Singh Dueba, will join Oli on the trip.

Oli’s visit is a departure from history as Nepal’s leaders usually visit India first after taking office – which is a nod to the close ties between Kathmandu and New Delhi.

However, Oli is thought to be a pro-China leader .

Oli previously visited China in March 2016 after taking power in 2015.

Oli and the CPN-UML have been pushing for more loans under China’s Belt and Road Initiative from its Exim Bank, as per Indian Express.

The newspaper reported that Oli, at a meeting of top Nepal’s officials last week which included Nepali Congress chief Sher Bahadur Deuba, his wife and Foreign Minister Arzu Rana Deuba and NC general secretary Gagan Thapa, said he had made assurances to China that it would be difficult for him to back out of.

Oli, attending a grand rally organised by his party in Kathmandu last week, claimed that the government is firmly progressing towards its commitment to development, prosperity, and good governance.

Oli during the rally hinted that he intends to sign a few projects with China.

“As much as possible we don’t want to take loans from anywhere; we are not in the condition that we can add on more loans but we have to increase our production. How can we increase our production? It’s not something that we need to be depressed about. Rather we should be hopeful and raise awareness within our circle, other smaller countries aren’t in the place where they’re now,” Oli said.

“Increasing productivity will be my priority,” he added.

 Nepali Congress opposes loan

But the Nepali Congress has been insistent on its stance against any new loans.

Oli during the meeting last week with the top officials was unable to convince his coalition partners the Nepali Congress to put pen to paper over the BRI framework, as per Indian Express.

The agreement, signed in 2017, is yet to be finalised.

“How much loan do we take? If grant, take it now. Let’s not add further burden,” Deuba told Oli during the meeting, as per Rising Nepal Daily.

According to The Times of India, China and Nepal are yet to negotiate a loan under the BRI despite intense efforts from Beijing.

Kathmandu has been historically reluctant to take loans – preferring instead to rely on grants –  given the state of its economy.

It is also wary of falling into a debt trap like some other countries .

The Nepali Congress leaders insisted that Oli sign the BRI framework treaty only if the projects have 100 per cent grants.

Beijing has made it clear it has no interest in doing so.

People in the know told The Times of India that the Nepali Congress may have a rethink about supporting the government if Oli proceeds with taking loans under the BRI over its objections.

The Nepali Congress, during a meeting at the Federal Parliament building to discuss Nepal’s current economic situation and reform measures, had yet again reiterated that it would not accept any new loans under the BRI.

Prakash Sharan Mahat, the Nepali Congress spokesperson and ex-finance minister, said that China must honour its prior commitments before any talk of new loans.

“The Nepali Congress is not opposed to the BRI, we are simply saying that we cannot take on new loans at this time,” he explained.

“In terms of the support we need for connectivity, we initially required grant assistance for road construction. Many of the commitments made by the Chinese government in grants have yet to be fulfilled, and those need to be addressed first.”

Mahat further added, “If the grant implementation itself is lagging, what is the point of discussing loans? The debt burden is already increasing. Therefore, we should avoid taking loans from any government, including the Chinese government.”

While the Chinese government is expected to implement grant commitments under the BRI, Mahat reiterated that new loans should not be pursued immediately.

“Regarding the BRI framework, are we attempting to combine other strategic security aspects into this? We believe these matters require careful consideration,” he stated.

“For now, the focus should be on implementing the grants, especially those under the BRI, and avoiding new loans,” he added.

Experts say Oli is in a tough spot.

“PM Oli is now treading a tightrope. He has to take the NC, the main ally of the coalition, into confidence so that he will make some significant gain from the China visit,” a piece in Rising Nepal Daily stated.

“Nepal’s political leaders should demonstrate their ability to navigate the geopolitical complexities. But their real leadership test lies in taking bold steps in the interest of the nation while avoiding the potential geopolitical pitfalls.”

 Oli remains upbeat

Oli though, has remained upbeat

At last week’s really he dismissed any rift between the coalition partners.

He said the cooperation between the CPN-UML and the Nepali Congress is aimed at lifting the country from its decline.

He also rubbished allegations made by his opponents, justified the alliance between the Nepali Congress and CPN-UML to form the incumbent coalition government, and vowed to take action against corruption, anarchy and those violating the law.

Any form of fraud, smuggling, corruption, character assassination, and obscenity is unacceptable, the prime minister said.

Addressing what is claimed to be the awareness campaign of the party, Oli urged the investors to invest with confidence as the government is on a mission to create a ‘Prosperous Nepal and Happy Nepali’ by maintaining peace and security.

“You should invest, the government will arrange security and good governance," he told industrialists.

Addressing the rally seen as Oli’s first show of strength of his party CPN-UML after assuming power a year and a half ago, the premier claimed the economy is improving due to the policies and plans adopted by the CPN-UML-Congress coalition.

Rejecting rumours spread by the opposition parties regarding the fall of the government, Oli assured it would run for a full five-year term till the next election.

He vowed to hand over power to Nepali Congress chief Sher Bahadur Deuba in a one-and-a-half-year term as per the power-sharing deal between the two largest parties.

He also sought to reassure India earlier this month.

“That I am visiting China first does not mean our relation with India is not good,” he told the Kathmandu Post.

“We took a position while India imposed a blockade [in 2015-16], so they were not happy. There is no reason for them to be unhappy with us [now] as we will maintain friendly, balanced and good relations with both our neighbors.” 

With inputs from agenciesex