With no international flights, the Pokhara International Airport has become a $215.96 million white elephant for Nepal. Made with Chinese loans, the high-interest rate is soon going to result in a debt problem for the Himalayan country.

A Nepali journalist was at the receiving end of China’s ‘Wolf Warrior’ diplomacy for reporting on the project’s pitfalls.

So far, information in the public realm has said that Nepal has to pay a 2 percent interest on the US $215.96 million Chinese loan for building the Pokhara International Airport, which has also been built by Chinese firms. However, a senior Nepali journalist, Gajendra Budhathoki, quoted “a signed official document” that the actual interest rate is 5 percent.

Budhathoki posted on X a social media post asking the Chinese ambassador to Nepal, Chen Song, for clarification. In an acerbic response, the Chinese envoy asked for the journalist’s apologies.

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However, a senior Nepalese journalist has said he had a copy of a signed official document showing the actual interest rate is 5%. In seeking clarification on this anomaly in an online post on May 27, the Chinese ambassador to Nepal, Chen Song, severely scolded senior Nepalese journalist Gajendra Budhathoki, demanding that he apologize.

Song said in his post on X: “Worst lies that I ever saw. It is public information, yet you dare lie about it.” In another post, he demanded an apology from Budhathoki, the chief editor of Taksar magazine, and also from “whoever the people you represent.”

Budhathoki, in his response, asked Song not to “intimidate” him as he has proof.

Nepal’s second-biggest airport, financed and constructed by China, was inaugurated with much fanfare in January 2023. The rate of interest for the loan was earlier reported to be 2 percent. But Budhathoki claims that he had the signed document for the loan agreement showing that the Export-Import Bank of China has given the loan at 5 percent.

The Economic Times has called the Chinese envoy’s public spat with the Nepali journalist part of ‘Wolf Warrior diplomacy’, a brand of hyper-public diplomacy conducted by Chinese diplomats targeting the host governments.

Song’s outburst has invited the ire of former diplomats and journalists in Nepal. “It is unusual for a foreign ambassador to demand an apology from a host country journalist for a social media post. He could refute or ask the government to clarify. The foreign ministry should remind the ambassador of the limits of ‘public diplomacy’ and risks of direct engagement,” Acharya opined in his post.

An International Airport With No Flights

Around a decade ago, China agreed to give loans to build the airport. China’s CAMC Engineering, the state-owned construction firm, built the airport. However, the airport has failed to attract any regular international flights, barring a few flights from China.

This has raised questions about how the airport will generate revenue to repay the Chinese loan. Kathmandu has been seeking Beijing to change the loan terms to ease the financial burden on the country, but China has not relented so far.

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In November 2023, The New York Times published a report that the Chinese construction firm had inflated the cost of the project and undermined Nepal’s efforts to maintain quality control, putting its business interests first. The report said that Nepal’s Civil Aviation Authority, reluctant to ruffle feathers in Beijing, overlooked the firm’s wrongdoings.

In the aftermath of the report, Nepal’s Commission for the Investigation of Abuse and Authority raided the Pokhara offices of the Civil Aviation Authority and seized documents related to the project. An investigation has been launched to ascertain the allegations.

A preliminary report shows that narrow-body jets like the Airbus A320 and A319 have payload issues due to obstacles near the airport, which is a 25-minute hop from Kathmandu.

The report indicates that the Pokhara International Airport has a payload penalty ranging from 5 to 10 tonnes, depending on the temperature and distance. The permissible load for an A320 is 77 tonnes, but an A320 taking off from Pokhara will be allowed to carry a maximum load of only 68 tonnes.

This load restriction means that airlines either incur a loss while flying to Pokhara or raise fares to compensate for 50 percent of the seats that have to be left empty. China also pulled the airport into a geopolitical quagmire with India by unilaterally proclaiming it part of its ambitious Belt and Road Initiative (BRI).

Nepal entered the Memorandum of Understanding (MoU) with China to facilitate transit transport, logistics, and related infrastructure development through cross-border projects, including railway, road, civil aviation, power grid, information, and communication.

Following the signing of the framework, Nepal initially listed 35 projects to be implemented under BRI; later, this number was whittled down to nine.

Even despite the Nepalese government’s apprehensions about how the projects will be financed—through soft loans or grants—China has moved to unilaterally claim various projects to have been completed under the framework of BRI.

Last June, Song launched the WeChat Pay Cross-border Payment Service in Nepal during the first Dragon Boat Race Festival between the two countries in June 2023. He posted on X: “Warm congratulations on WeChat Pay Cross-border Payment Service Inauguration in Nepal. A new step forward in financial connectivity, one of the five “connectivities” under the BRI initiative.”

The fate of the Pokhara International Airport resembles that of the Mattala Rajapaksa International Airport at Hambantota, which has earned the moniker of “world’s emptiest airport.”

The airport was built at the cost of US $209 million, out of which China financed US $190 million in the form of soft loans. With no flights, the cost of paying off this loan alone was nearly US $ 17 million per year.

China’s Money – A Poisoned Chalice

Countries around the world that have taken large loans to fund infrastructure projects are said to be spiraling down into a debt trap. Sri Lanka is a case in point. China has been lending money for infrastructure projects close to the market interest rate and, in most cases, has insisted on using Chinese firms and contractors.

China uses the loans to seek geopolitical leverage. A 2021 study analyzed over 100 debt financing contracts China signed with foreign governments.

The borrowing countries were bound with absolute confidentiality, and the contract also contained clauses against restructuring the loan from 22 major creditor nations known as the “Paris Club.”

China also retained the right to demand repayment anytime and could use it to strong-arm countries to be in line regarding issues like Taiwan.

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