Critics use Sri Lanka as an example of the “debt trap” to which China is subjecting several countries in the world, especially African ones, forced according to them to make exaggerated commercial or diplomatic concessions to delay repayments.
A brand new international airport with no traffic, an inactive conference center or a port ceded to a Chinese company are some of the colossal investments that aggravated the foreign debt of Sri Lanka10% of which contracted with China.
The island of 22 million people took on massive debt to overcome years of budget and trade deficits. For months, the population has suffered serious shortages of food, fuel and medicine and blamed the president Gotabaya Rajapaksa of this historic crisis. Rajapaksa fled this Saturday from the presidential palace in the midst of a popular revolution due to the economic crisis.
During Mahinda Rajapaksa’s time as president (2005-2015), the Hambantota region, the clan’s ancestral fiefdom, benefited from a torrent of investment for major infrastructure works, punctuated by suspicions of corruption.
For the construction of the Mattala Rajapaksa International Airport, China lent the country 200 million dollars, but the terminal is used so little that its income is not even enough to cover electricity bills.
But in 2017, Colombo was unable to repay its $1.4 billion debt owed to Beijing for the construction of the Hambantota deepwater port.
“We are up to our necks in debt,” lamented Krishantha Kulatunga, owner of a small stationery store in Colombo.
His store is near a skyscraper in the shape of a lotus flower, the “Torre Lotus”financed with Chinese funds but which has not been opened to the public.
“How can we be proud of this tower when they leave us begging for food?” asks the merchant, indignantly.
“China did what it might”
China, the government’s main bilateral lender, holds at least 10% of its foreign debt, valued at 51 million dollars, although analysts believe it is actually much higher.
The government tried to negotiate the payment schedule with China, but Beijing preferred to offer 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 is likely to be affected by a discount on its loans, like other creditors.
“China did its best to help Sri Lanka avoid default but unfortunately the country went to the IMF and chose default” on April 12, Chinese Ambassador Qi Zhenhong declared in Colombo last month.
The IMF requires Sri Lanka to restructure its debt before any bailout, and this “surely [tendrá] an impact on future bilateral loans” from Beijing to Colombo, warned the ambassador.
