Sri Lanka has fallen for the Chinese debt-trap diplomacy. For a significant time, Sri Lanka has been in a financial crisis. The pandemic has made it worse, people are living with great difficulties, and the government is finding ways to get out of this economic crisis.
Last month Sri lanka signed a USD 1 billion credit line with India, which will help procure food and other essential items, including medicine. Meanwhile, China has refused to offer any concessions in debt repayment. The total debt to China stands at USB 8 billion, which is almost one-sixth of Sri Lanka’s total external debt of USD 45 billion.
A significant problem faced by Sri lanka is that it has a substantial foreign debt burden, and it owes over USD 5 billion to the Chinese alone. Sri lanka’s foreign reserves are shrinking partly because the construction projects with the Chinese seem to suffer losses.
Sri lanka is facing one more crisis, too, as China has reportedly refused to respond to Sri lanka’s appeal to reschedule its vast debts, and its Ambassador to Sri Lanka said in March that this country was keener on considering a further USD 1 billion loans and USD 1.5 billion credit line.
Hence China has refused to give any assistance to Sri lanka, and the people in Sri lanka continue to suffer.