1. China and Sri Lanka’s Debt Crisis: Belt and Road Initiative Blowback
- Author:
- Sudha Ramachandran
- Publication Date:
- 05-2022
- Content Type:
- Journal Article
- Journal:
- China Brief
- Institution:
- The Jamestown Foundation
- Abstract:
- Sri Lanka is in the grip of an unprecedented crisis. For several months, the country has been reeling under a severe foreign exchange crisis. In early May, Foreign Minister Ali Sabry said that its usable forex reserves were just $50 million (Daily News, May 5). As a result, Sri Lanka has been forced to suspend repayment of $51 billion worth of debt owed to China, Japan and other foreign creditors (The Hindu, April 12; The Island, April 13). The country has also been unable to pay for imports of essential commodities, and has experienced serious shortages of food, fuel and medicine (The Island, January 15). The economic crisis has in turn triggered a political crisis. Public anger has boiled over onto the streets. Angry protesters have been calling for the resignation of President Gotabaya Rajapaksa and his brother, Prime Minister Mahinda Rajapaksa (Colombo Telegraph, April 7). The Rajapaksa family has dominated Sri Lankan politics for decades and several members of the family are in positions of power as ministers, legislators or heads of corporations and departments. Sri Lankans want the entire clan out. Some of them, including Mahinda, resigned under public pressure in recent months (Island, April 17). Although Gotabaya remains president and under the country’s executive presidential system, continues to wield enormous power, it is evident that the influence of the Rajapaksas has declined. The unfolding crises in Sri Lanka have implications beyond the island. China is among Sri Lanka’s largest bilateral lenders and has played a big role in the island’s infrastructure development. Sri Lanka is a part of China’s Belt and Road Initiative (BRI). Despite China’s pledges that BRI would boost Sri Lanka’s economic and social development by transforming it into “the hub of the Indian Ocean”, Chinese loans are widely believed to have pushed the country into a ‘debt trap’ (Embassy of the People’s Republic of China in Sri Lanka, June 16, 2017). How have the crises impacted China’s image in Sri Lanka and will the decline of the Rajapaksas, widely regarded as ‘pro-China,’ impact Sino-Sri Lankan relations? Finally, will the Sri Lankan crises affect the fate of BRI?
- Topic:
- Debt, Development, Politics, Infrastructure, Economy, and Belt and Road Initiative (BRI)
- Political Geography:
- China, South Asia, Asia, and Sri Lanka