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China’s Lending Comes Under Fire as Sri Lankan Debt Crisis Deepens

China’s Lending Comes Under Fire as Sri Lankan Debt Crisis Deepens



A deepening debt crisis has left Sri Lanka struggling to pay for imports and stoked political controversy over Chinese lending to the South Asian nation as part of Beijing’s global Belt and Road infrastructure program.

The crisis has also opened a window for India, which provided financial relief to Sri Lanka last week shortly before a $500 million bond matured, to push back against Chinese influence in the Indian Ocean region.

Ajith Nivard Cabraal, Sri Lanka’s central bank governor, said on his official Twitter account that the country had repaid the bond, which matured on Tuesday. It was the first major tranche of $4.5 billion total sovereign-debt repayments due in 2022.

But with around two-thirds of government revenue already going toward interest payments, President Gotabaya Rajapaksa warned in a speech to Parliament that the country had insufficient foreign-currency reserves to pay for the imports it needed.

That warning followed his appeal last week to visiting Chinese Foreign Minister Wang Yi for Beijing to restructure its debt, provide concessional trade terms, and lift Covid-related restrictions on Chinese tourists visiting Sri Lanka.

It also came after unusual criticism from within Sri Lanka’s ruling party over China’s lending for a series of major infrastructure projects, which include a $13 billion seafront business hub in the capital, Colombo, and a port and airport in the Rajapaksa family’s home constituency of Hambantota.

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Harvey Yan


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