NADI, Fiji—As countries look forward to the economic gains from the Belt and Road Initiative (BRI), the Asian Development Bank (ADB) issued a word of caution at its annual governors’ meeting here: countries, it said, should be “careful” and ensure that debts linked to the initiative will not “cause trouble for the payment capacity of the government.”

In his press briefing on Thursday, ADB President Takehiko Nakao said that, while the BRI is a “natural idea” given the history of trade and bilateral relations in countries included in the initiative, countries cannot afford to be complacent.

China created the BRI, the maritime silk road, to revive and expand the silk road that for years had connected the Asian giant with other nations through trade. The BRI as it has been trotted out by China in recent years includes Asian and European countries included in the original silk road and other countries that were not part of the trade route such as Malaysia and Indonesia.

“We must be careful that we must find good projects with good return and even if the lending is to the government; each project identified should have a strong economic ground with good return. Otherwise, it would cause trouble for the payment capacity of the government,” Nakao said.

“There are a lot of discussions about debt issues related to the BRI.”

Nonetheless, he acknowledged that China President Xi Jinping had recognized the need to address these “debt issues” in his remarks at the BRI meeting a few days ago.

Nakao said it is also important to “pay attention to [the] social and environmental impact of the projects” to ensure that they will address development constraints and not add to them.

Nonetheless, Nakao said he believes the infrastructure investments linked to the BRI are still needed to boost global economic growth.

Moody’s agrees

Meanwhile, credit rating agency Moody’s agreed with Nakao and said the BRI can help boost economic growth in 12 Asia Pacific (Apac) and Commonwealth of Independent States (CIS) sovereigns, but added that project implementation and Chinese loans to be used to finance these projects are causes for concern.

Moody’s said countries with weaker fiscal and external positions, as well as large volumes of non-concessional funding, are at biggest risk in terms of debt sustainability and balance of payments pressures.

These countries at risk of rising debt and wider external imbalances, Moody’s said, are Maldives, Pakistan and Sri Lanka.

“Inefficient project implementation, and the absence of macroeconomic and structural reform requirements in many Chinese loans can lessen longer-term credit benefits for some sovereigns,” said William Foster, a Moody’s vice president and senior credit officer.

“Meanwhile, the scale and terms of BRI investment can amplify macro-stability risks for sovereigns with weaker economic fundamentals and limited policy effectiveness,” he added.

However, Moody’s said Pakistan, Mongolia, Kazakhstan and Cambodia are the countries that would likely reap the greatest potential for economic gains from the BRI.

It added that Kazakhstan, Vietnam and Thailand are not significantly exposed to potential BRI-related macro-stability risks, due to generally stronger sovereign credit profiles or the smaller relative scale of their projects.

Key global player

In 2014, China created the 21st Century Maritime Silk Road initiative, which sealed its position as a key player in global trade. The initiative was envisioned to greatly increase trade between and among the countries, as well as make logistics and trade more affordable in the region.