How China left Sri Lanka in financial fiasco

The Sri Lankan economy is on the verge of collapse. Several geopolitical experts cite Sri Lanka as an example of China's "strategic trap diplomacy or "debt-trap diplomacy".

Foreign debts and loans taken from China have led to the worst economic crisis in Sri Lanka. The country is currently facing an acute shortage of food, fuel and all essential commodities in the country. The debt-ridden country is unable to meet the ends of its own people.

While speaking to India Today, leader of the opposition Sajith Premadasa said, “Post 2009 war with the rebels, Sri Lanka looked at China for financial help. Taking loans from various countries, Sri Lanka's total external debt surged to more than $45 billion, of which, around $8 billion was from China.”

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Sri Lanka borrowed $1.2 bn from China to build Humbantota Port. The island failed to run the port and to pay the debt back to China. They negotiated and handed over the strategically critical and crucial port which was very close to the international maritime route to the Chinese on lease for 99 years.

Shashi Dhanatunge, economist and former chairman of a shipping corporation and vice chairman of the civil aviation authority said, “Hambantota port is no longer in Sri Lanka's control. In 2017, the debt-ridden country handed over the port city to China as it was struggling to pay the debt of several Chinese firms. Whatever money it earned also vanished by paying off debts.”

He added, “The loans taken from China triggered the misery in Sri Lanka.”

“Loan from China, followed by Covid outbreak and the failed port city project in sequence added to the financial fiasco in Sri Lanka,” he said, adding, “Now Lanka is living on a credit card given by India as China refused rescheduling and offered only another loan that could lead to selling more national assets.”