Friend Or Foe? Before $2.5 Billion 'Help', China Had Rejected Sri Lanka's Loan Rescheduling Appeal

Just a handful of days after it was announced that China is providing $2.5 billion monetary help to crisis-hit Sri Lanka, it has now come to light that China had refused Sri Lanka’s appeal to reschedule its huge debt burden, as reported by ANI.?

In the face of the deepening foreign exchange crisis, Sri Lanka President Gotabaya Rajapaksa sought China’s help in December 2021 as he requested a debt restructuring in a meeting with China Foreign Minister Wang Yi. However, Beijing had reportedly shown Colombo the door.

AFP

Also Read:?Protests Flare In Sri Lanka's Capital Colombo Amid Worsening Economic Crisis, Ask President To Resign

This comes amidst the news that China has shed some crocodile tears over the economy of Sri Lanka getting caught in a quagmire after hobnobbing with the BRI projects of China: record inflation, soaring food prices and the sufferings of the people, as per a media report.

The report added “The key concern, however, is how such a negative situation would impact the attitude of Colombo towards borrowings from China, and what it would mean for the ultimate relation between China and Sri Lanka. There is concern that the experience of Sri Lanka is prompting countries like Myanmar, Malaysia and Nepal to suspend Chinese investment projects”

The Huge Chinese Debt?

Though the crisis in Sri Lanka was apparent after the pandemic that dried up the international tourist traffic to the island nation, one of its main foreign exchange-earners, the country’s debts spiralled and foreign exchange reserves shrunk as the end result of reckless borrowings from China to finance infrastructure projects, reported The Hong Kong Post.

This debt burden has been a result of China’s Belt and Road Initiative (BRI) projects like Hambantota Port and Colombo Port City for which Chinese agencies lent large amounts to Sri Lanka under stiff terms of repayment.

Notably, in 2021-22, Colombo’s debt repayment to Beijing amounted to nearly $2 billion. Further, Hambantota port has already been leased out to China for 99 years against USD 1.2 billion.

Further, China-assisted projects in Sri Lanka are likely to deepen the indebtedness of the island nation. Locals of Sri Lanka are even reportedly protesting against some of these projects which will affect their livelihood.

Also Read:?How Sri Lanka's Economic Crisis Has Led To Used Cars Costing More Than A Luxury Flat

For the latest financial news,?keep reading Worth.?Click here.