The Chinese model of extending loans to needy countries and promising to build world-class infrastructure on their territory using these loans has worked magnificently in Sri Lanka. It has worked magnificently for China alone, of course. Sri Lanka, on the other hand, has been handicapped. It has been reduced to a second-grade entity within its own territory. Sri Lanka is burdened by an embarrassing debt which it is unable to pay to China. Sri Lanka has run up an external debt of more than $45 billion — about 60% per cent of its nominal GDP (2020).
In the latest news, the president of crisis-hit Sri Lanka has asked China to restructure its debt repayments. Gotabaya Rajapaksa made the request during a meeting with Chinese foreign minister Wang Yi earlier this month. In the last decade, China has lent Sri Lanka over $5bn (£3.7bn) for projects including roads, an airport, and ports. In 2022 alone, Sri Lanka is required to pay about $4.5bn in debt.
How the Rajapaksa Brothers Welcomed China with Open Arms
Sri Lankan president Gotabaya Rajapaksa admires China. Why? Because he wants to establish a one-party rule in Sri Lanka as well. You see, China is an inspiration for authoritarians around the world. Here are some facts. For the first time in Sri Lankan history, the country’s finance, economic policies, and defence ministries are led by three brothers. Gotabaya Rajapaksa is the President of Sri Lanka; Mahinda Rajapaksa is the Prime Minister and Basil Rajapaksa is the finance minister.
There are five other members of the Rajapaksa family that are serving as ministers in the current Sri Lankan government. The Rajapaksa family is one where avid CCP supporters are found in abundance. The Rajapaksa brothers are looking to consolidate political power in the country by allowing China to colonise and debt-trap it.
In July last year, Prime Minister Mahinda Rajapaksa praised CCP’s role saying, “China has successfully eradicated poverty of 900 million people under its open economic policy… I am confident that China will bring back the economic strength that Asia had 500 years ago through this Silk Road. China always believed that improving infrastructure will provide new ways and new strengths for the people. Therefore, we have constantly invited China to help develop the infrastructure of our country.”
In fact, the Sri Lankan government also issued a special coin to commemorate the CCP’s centenary. It is almost as if Sri Lanka was much more excited than the Chinese Communist Party itself last year, during the latter’s centenary celebrations. According to ORF, Sri Lanka’s leftist political parties and the ruling Rajapaksa SLPP conducted a joint conference online with China to support the CCP centenary.
During the conference, Mahinda Rajapaksa said, “The friend will always be there, both in sorrow and pleasure. Like the murals on a wall, they never look away…we appreciate the commitments made by the Chinese government for our independence during and after the war, forever.” The conference concluded by the Sri Lankan parties calling the CCP a “steadfast champion” for developing countries. The Rajapaksa regime also signed a joint statement initiated by China at UNHRC, raising concerns on the human rights situation in the UK.
India Steps in To Knock Some Sense into the Sri Lankan Government
Giving major heartburn to China, New Delhi and Colombo January 5 announced their decision to jointly develop an oil tank farm in the island’s north-eastern Trincomalee province. According to the agreement reached, the Indian Oil Subsidiary, Lanka IOC (LIOC) would be given a 49% stake in the joint development of the Trincomalee Oil Tank farm, with Ceylon Petroleum Corporation keeping 51%.
Earlier this month, India also confirmed a $400 million currency swap with Sri Lanka while deferring another $500 million due for settlement to the Asian Clearing Union (ACU). After India extended a bailout package worth $900 million to Sri Lanka, the island country is now requesting New Delhi to pour investments into its port, infrastructure, energy, power, and manufacturing sectors.
Sri Lankan Finance Minister Basil Rajapaksa held talks with External Affairs Minister S Jaishankar on January 15 and discussed projects and investment plans by India that would strengthen the economy of the island nation. Thanking New Delhi for the bailout package, Rajapaksa also added that Colombo will create a ‘conducive environment’ so that it benefits both sides.
New Delhi, in addition to the $900 million line of credit, is also looking to inject $1.5 billion into the Sri Lankan economy. New Delhi is also facilitating Indian investments in different sectors in Sri Lanka to contribute to the growth and expand employment. India is, therefore, providing sufficient incentives for Colombo to dump China. If Sri Lanka fails to do so even now, it is bound to enter a doomed future.