Critics use Sri Lanka as an example of the “debt trap” that China is subjecting to several countries around the world, especially African countries, which, in their opinion, are forced to make exaggerated trade or diplomatic concessions to delay payment.
A brand new international airport with no traffic, an inactive conference center or port ceded to a Chinese company are some of the huge investments that have exacerbated the foreign debt of Sri Lanka10% of which are contracted China.
The island of 22 million people borrowed huge debts to overcome years of trade and budget deficits. For several months, residents suffered from serious shortages of food, fuel and medicine and blamed the president Gotabaya Rajapaksa this historical crisis. Rajapaksa on Saturday fled the presidential palace amid a popular uprising due to the economic crisis.
During Mahinda Rajapaksa’s tenure as chief (2005-2015), the Hambantota region, the clan’s ancestral fiefdom, benefited from a torrent of investments for major infrastructure work, punctuated by suspicions of corruption.
In order to build the Mattala Rajapaksa International Airport, China loaned the country $200 million, but the terminal uses so little that its income is not even enough to cover the 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 owe it up to our necks,” said Krishantha Kolatunga, owner of a small stationery shop in Colombo.
His shop is located near a skyscraper in the shape of a lotus flower “Lotus Tower”funded by China but not opened to the public.
“How can we be proud of this tower when they let us beg for food?” asks the merchant frustrated.
‘China did what it could’
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.
“China did its best to help Sri Lanka avoid default, but unfortunately the country went to the IMF and chose to default.” On April 12, Chinese Ambassador Chi Jinhong announced in Colombo last month.
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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