How China pushed Sri Lanka to collapse

Demonstrators protest inside the president’s home building, after President Gotabaya Rajapaksa flees, amid the country’s economic crisis, in Colombo, Sri Lanka, July 9, 2022. (Reuters) / Dinuka Liyanawatte

An international airport with no traffic, an inactive conference center or a port ceded to a Chinese company are some of the massive investments that have exacerbated Sri Lanka’s foreign debt, 10% of which is contracted to China.

Sri Lanka is an example of the debt trap that China is subjecting many countries in the world to, forced to make exaggerated trade or diplomatic concessions to delay payments.

The island of 22 million people borrowed huge debts to overcome years of trade and budget deficits. For months, the population has been suffering from severe shortages of food, fuel and medicine and blames President Gotabaya Rajapaksa for this historic crisis. today, Thousands of protesters stormed the presidential residence They removed him from power.

A day of mass protests to demand the resignation of the President of the Republic over his handling of the economic crisis

To build Mattala Rajapaksa International Airport, China loaned the country $200 million, but the plant is so underused that its income isn’t even enough to cover its electricity bills.

But in 2017, Colombo was unable to repay its $1.4 billion debt owed to Beijing to build the Hambantota deep-water port. We were very optimistic when the projects were announced. And in this area things were better,” recalls Dinuka, a local. But now it doesn’t mean anything. And our sons will also continue to pay this debt.”

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The port, on the world’s busiest east-west shipping lane, was supposed to boost industrial activity, but it posted $300 million in losses in six years. In the end, the country had to cede it to a Chinese company for 99 years.

Sri Lanka’s indebtedness to China as a result of these projects has raised concerns among Western countries and India.

Financial generosity over several decades and poor governance […] “We got sucked into this quagmire,” Murtaza Jafferji, head of the Sri Lankan Advocata Institute, a think-tank, told AFP.

Another example: a convention center near the port cost $15.5 million, and since it opened it has done nothing but gather dust.

“We owe it up to our necks,” said Krishantha Kolatunga, owner of a small stationery shop in Colombo.

    Xi Jinping
Xi Jinping

His shop is located near a lotus-shaped skyscraper, the “Lotus Tower”, funded with Chinese money but never opened to the public. “How can we be proud of this tower when they let us beg for food?” asks the merchant frustrated.

China, the government’s main bilateral lender, holds at least 10% of its foreign debt, which is worth $51 million, although analysts believe it is much higher.

The government tried to negotiate with China on the repayment schedule, but Beijing preferred to provide more bilateral loans to repay existing loans.

In the end, Sri Lanka turned to the International Monetary Fund (IMF) last month, much to the chagrin of Beijing, which, like other creditors, is likely to be affected by a discount on its loans.

The International Monetary Fund demands Sri Lanka to restructure its debt before any rescue plan, and this is “certainly [tendrá] Impact on future bilateral loans from Beijing to Colombo, the ambassador warned.

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When US and Indian officials accuse China of bullying poor countries with onerous loans, Sri Lanka is the most cited example.

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Freddie Dawson

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