China represents over 20% of Sri Lanka’s total external debt, according to a study
According to estimations by the China Africa Research Initiative Sri Lanka’s economy owed Chinese lenders $7.4 billion by the end of last year. Or about a fifth of its total public external debt. This estimate was greater than that of many other organizations.
The report noted that the number was higher than the commonly cited 10 to 15 percent statistics. And that a “substantial amount” of the nation’s debt to China had been classified as lending to state-owned companies. Rather than the central government.
Crisis-hit After years of poor economic management. And the COVID-19 outbreak caused the country to experience its biggest economic crisis. This is since gaining independence from Britain in 1948. Sri Lanka is currently undergoing a debt restructuring.
According to data gathered by CARI at the Johns Hopkins University School of Advanced International Studies, the two largest Chinese lenders are the Export-Import Bank of China (EximBank) and the China Development Bank, with respective lending amounts of $4.3 billion and $3 billion.
The largest bilateral creditor of Sri Lanka is China. Which is also involved in official creditor negotiations to restructure the nation’s debt together with Japan and India. According to CARI scholars Umesh Moramudali and Thilina Panduwawala, “China would have to play a substantial role in Sri Lanka’s debt restructuring process.” The newest meetings that were anticipated earlier this month were postponed, raising concerns about how quickly the debt restructuring can move through.
Overview Of the Economy
The analysis of economy estimates that the island nation’s overall external debt is $37.6 billion. Public external debt increases to $40.6 billion when central bank debt in foreign currencies is added. Of which 22% comes from Chinese creditors. This debt includes a $1.6 billion currency swap with China. The $46.6 billion total debt figure released by the government in September. This differs from the one provided by CARI. Because it leaves out loans to some state-owned businesses and local hard currency debt.
The EximBank made six different loans. Totaling almost $1.3 billion to the deep water port in Hambantota between 2007 and 2013. According to the CARI report. “Submit the loans to Chinese governing legislation and arbitration before the China International Economic and Trade Arbitration Commission,” according to a stipulation in the loan agreements
A loan provided to the Sri Lankan government by the Exim Bank of China to construct the Magampura Mahinda Rajapaksha Por And Mattala Rajapaksha International Airport. This is one of the most frequently cited instances of alleged debt-trap diplomacy by China. The Magampura Port was built by the state-owned Chinese companies China Harbour Engineering Company and Sinohydro Corporation at a cost of US$361 million, with 85% of the funding provided by China’s State-owned Export-Import Bank at a 6.3% annual interest rate.