May 24, 2022
2 mins read

Debt-ridden Lankan economy may take long time to revive

This year Sri Lanka needs to repay over USD 1.5 billion to China alone for debt servicing…reports As;ian Lite News

The failure of Sri Lanka’s economy due to faulty economic planning bore fruit for China’s strategic ties as the island nation is caught in a vicious cycle of Chinese loans.

Upon shocks of the Covid-19 pandemic and the Russia-Ukraine war, Sri Lanka’s over-reliance on China as a development partner proved wrong as China’s predatory debt diplomacy increased the foreign debts of the nation and amplified the crisis.

As Sri Lanka slid into a foreign exchange crisis, China just came forward with a proposal for a paltry USD 500 million concessionary loans for 10 years to deal with the economic fallout of the pandemic and showed a willingness to renegotiate only a handful of Chinese debt, standing close to USD 6.5 billion and constituting more than 10% of Sri Lanka’s total foreign debt over USD 50 billion, Dailymirror reported.

Additionally, China did not entertain Sri Lanka’s request for debt deferment of around USD 2.5 billion saying there is no such provision in their financial system, instead it evinced interest to consider providing a loan to repay debt due to it.

This year Sri Lanka needs to repay over USD 1.5 billion to China alone for debt servicing, the report stated further.

Sri Lanka’s economic crisis is self-made as the nation’s infrastructure development was based on borrowing while its foreign exchange earnings remained highly dependent on tourism which crashed due to covid.

Colombo, in its efforts to speed up its economic growth, resorted to quick fixes whereas China strengthened its manufacturing base and promoted exports at the same time.

Moreover, a better strategy for Sri Lanka would have been to ask for assistance from multilateral agencies on soft terms instead of Chinese loans near commercial terms.

According to Dailymirror, the World Bank recently agreed to provide USD 600 million in assistance to help the country meet requirements for essential imports, however, if the country resorted to World Bank loans for infrastructure development at cheaper rates rather than Chinese loans earlier, it could have avoided such a crisis.

At this time when China is dithering, crisis-hit Sri Lanka has only one option to explore, i.e. to seek USD 3-4 billion International Monetary Fund (IMF) assistance.

Sri Lanka’s economy has been in a free fall since the COVID-19 pandemic due to the crash of the tourism sector as well as foreign exchange shortage which has led to food, fuel, power and gas shortages and has sought the assistance of friendly countries for economic assistance. (ANI)

ALSO READ: Controversial 21st Amendment tabled before Lankan cabinet

Previous Story

Controversial 21st Amendment tabled before Lankan cabinet

Next Story

3 Indians on TIME’s ‘100 most influential people of 2022’

Latest from -Top News

UN Slams Pakistan Over Minority Attacks

The minorities in Pakistan – including Ahmadiyya Muslims, Christians, Hindus, and Shia Muslims – continue to be neglected and increasingly subjected to targetted state-backed persecution….reports Asian Lite News Alarmed by rising violence

Cambodia-Thailand Agree to Truce

The border violence has claimed at least 35 lives and left more than 200 injured, based on figures from Thai and Cambodian officials….reports Asian Lite News Cambodia and Thailand have agreed to

Baloch Activist Thanks India, Slams Pakistan Terror

Mir Yar Baloch also appreciated the extraordinary courage and professionalism of the Indian Armed Forces, the “responsible and patriotic role” of the Indian media…reports Asian Lite News Prominent Baloch human rights activist

UK Warns China Over Taiwan Moves

Healey’s comments come amid rising global concerns over Chinese military activity around Taiwan and the growing Western focus on the Indo-Pacific region. British Defence Secretary John Healey has said the UK is

US Sticks to August 1 Tariff Deadline

US Commerce Secretary Howard Lutnick ruled out any possibility of an extension…reports Asian Lite News The US administration on Sunday said the August 1 deadline for imposing reciprocal tariffs remains unchanged and
Go toTop

Don't Miss

UN breather for crisis-hit Lanka

The Prime Minister further informed that he spoke with officials

Lanka seizes 300 kilos of heroin

While six Sri Lankans aboard the fishing trawler were arrested