After Pakistan, China ‘ruins’ Sri Lanka’s economy
Colombo, March 22: Sri Lanka is battling one of its worst economic crises in over seven decades, as successive governments in the island nation have ignored sovereign bonds to Sri Lanka, with China being a major lender.
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It has succumbed to Chinese foreign investment with the hope for better infrastructure, higher employment, income, economic stability, thereby increasing the standard of living of the common people. However, they ignored repeated warnings of China's ulterior motives of keeping them indebted and dependent for years. The country has foreign debt obligations of around USD 7 billion in 2022, including prepayment of bonds worth USD 1 billion in July 2021.
Sri Lanka found a "friend" in China after the war with LTTE. Footprints of China became visible in Sri Lanka with infrastructure projects like bridges, roads, railways, ports, airports, offers to develop special economic zones (SEZ), oil refineries, industrial towns, LNG power plants, etc.
However, the eclipse of domestic innovation made Sri Lankans mere spectators while the country remained more China dependent.
Despite huge Chinese investments in Sri Lanka for years, the country is reeling under one of the worst economic crises in its history with depleting forex reserves, huge foreign debt and debt servicing obligations. The crisis has now hit the nerves of the common man with a shortage of food, fertilizer, fuel, power and spiralling prices.
Apprehending the major political fallout of the current crisis, President Gotabaya Rajapaksa requested Chinese Foreign Minister Wang Yi during his visit to Sri Lanka in January this year to restructure debt repayments. Wang's visit comes after China-Sri Lanka relations took a nosedive after a recent tussle over contaminated organic fertilizer dispatched to Sri Lanka.
China's relatively closed and inward-looking investment model with low participation from Sri Lankans is a matter of concern. The current crises expose the inability of Chinese investments to generate sustainable employment and revenue generation in the island nation, thereby having little impact on the lives and livelihoods of the common people.
Further, Chinese investments failed to ensure enough forex inflows to equip the Sri Lankan exchequer to service its debts. Though China refutes these assessments, structural imbalance in bilateral trade, investment, rising debt and interest obligations are the hot subjects among the intelligentsia, media and even on the streets.
The Sri Lankan government under liberalization policy has tweaked their foreign investment policies to attract foreign investments since the 1980s.
China enjoyed liberal duty exemptions for the huge imports from China for infrastructure projects. The quantum of duty exemptions granted to China for years since the construction of Hambantota port (Nov 2010), to the reclamation of land (2020) for the Colombo Port City project can no way match the benefits accrued to the common people of Sri Lanka.
However, the quantum of benefits enjoyed by the political leaders of Sri Lanka is an open secret.
China successfully cultivated the Buddhist clergy and arranged lucrative trips to China to create public opinion in favour of Chinese investments and its footprints in Sri Lanka, despite China attempting to destroy Buddhism in China and forcing Tibetans to seek refuge in the neigbouring countries.
Loss of employment of local Sri Lankans due to implementation of Chinese investment projects solely through state-owned Chinese companies and deploying large numbers of Chinese experts and technicians are yet to attract the attention of public scrutiny.
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-PTC News
