Administered by the State of China Global Times An editorial released on Monday sought to deprive Beijing of part of its responsibility for Sri Lanka’s current economic crisis, which came as a result of Colombo’s recent decision to default on its huge foreign debt, including a large sum owed to China.
Arguing that the Chinese government was not responsible for Sri Lanka’s financial instability, newspaper editors wrote on July 11:
Many research reports have repeatedly proven that Sri Lanka’s current debt crisis is not directly related to Chinese-funded infrastructure investment. Bilateral foreign debt to China is only 10 per cent of Sri Lanka’s total outstanding foreign debt.
Commercial creditors of Western countries and multilateral financial institutions are responsible for Sri Lanka’s foreign debt. They have sold loans to the so-called vulture fund, which has really exploited every penny in Sri Lanka. Therefore, it is not baseless to disrespect China by accusing it of digging a “debt trap” and even attacking the Belt and Road Initiative.
Led by the Chinese Communist Party Global Times The Belt and Road Initiative (BRI) in Beijing has been mentioned. The program provides loans to developing or low-income countries funded by the Chinese government so that they can build new infrastructure projects. Observers have criticized the BRI loan for its tendency to push economically backward countries into Beijing’s debt. This plight, observers argue, not only traps BRI participants in a vicious cycle of debt but also puts their governments at risk for exploitation by China’s ruling Communist Party. BRI projects are spread worldwide and are currently available across Southeast Asia, Central Asia, the Middle East, Europe, Latin America and Africa.
A Chinese state-owned company seized control of the Sri Lankan port of Hambantota in late 2017 when the Sri Lankan government defaulted on a BRI loan from Beijing to develop the port. Physical control of the Colombo port has given Beijing a 99-year lease. The agreement included a provision to extend the lease for an additional 99 years. The decision to hand over the strategic Indian Ocean port of Colombo to China alarmed observers at the time, many of whom were concerned about the impact of the agreement on Sri Lankan sovereignty.
Sri Lankan President Gotabaya Rajapaksa in January asked Beijing to restructure about 5 5 billion in payments borrowed from Colombo under the BRI.
“The president noted that it would be a great relief for the country to focus on restructuring debt repayment as a solution to the economic crisis facing Covid-19. [Chinese coronavirus] The epidemic, ”Rajapaksa’s office said on January 9 after meeting with Chinese Foreign Minister Wang Yi.
The request served as a catalyst for Sri Lanka’s impending financial crisis, which began to rise in January after Colombo identified a deficit in foreign exchange reserves. Sri Lanka is an island nation on the southernmost coast of India that relies almost entirely on foreign exchange reserves to purchase and import its most basic products, including food, energy and medicine. Sri Lanka’s essential goods began to dry out in early March alongside its foreign exchange reserve stores. This led to severe disruptions to food and fuel in the following weeks.
Lack of fuel created a whirlwind blackout that plagued the small country and plunged its people into deadly unrest. As a result of political unrest, Sri Lankan President Gotabhaya Rajapaksa announced plans to resign on July 11.
Sri Lanka on April 12 announced plans to default on its foreign debt. It requested a monetary bailout from the International Monetary Fund (IMF) at the time and is currently awaiting a response from lenders worldwide.