In total, the share of the Sri Lankan external debt held by Beijing is 19.6 %, far beyond what always admitted China.
by Julien Bouissou
Did Chinese loans plunge Sri Lanka into the economic and political crisis in the spring? Their rapid increase, from 1 % to 19.6 % of the total Sri Lankan external debt between 2000 and 2021, fueled suspicions of a “trap” set by China to extend its influence. This spent between 500 billion and $ 1,000 billion (between 480 billion and 960 billion euros) to dozens of countries along the “new silk roads” in just two decades. >
The two Sri Lankan economists Umesh Moramudali and Thilina Panduwala wanted to “separate the myth from reality” from this aid to their country, combing the end of many official contracts and documents signed by Colombo. Their report published, Thursday 1 er December, by the China Africa Research Initiative Research Center of the American University Johns-Hopkins, beats many received ideas.
“We have found no” deliberate “debt” in the loans granted by China to the public sector of Sri Lanka “, affirm the two authors, in response to all those who denounce his opacity. If the figures are hidden, it is often due to the borrower country, which, for example, artificially reduces its debt by passing its loans in the balance sheet of public enterprises.
lack of transparency
In total, economists believe that the share of the Sri Lankan external debt owned by Beijing is 19.6 %, far beyond what always admitted China (between 10 % and 15 %), which, in full economic slump in the spring, sought to minimize its role. Not only is it the first creditor country in Sri Lanka, but its interest rates are much higher (3.2 % on average, against 1.6 % at most for those in Japan or the World Bank). >
Chinese loans are not transparent, due to the many confidentiality clauses which appear there. Others are problematic. The authors of the report discovered that in the event of default, Colombo had agreed not to “seek to obtain comparable conditions” of restructuring to those granted by other creditors. A sprain in the principle of equal treatment dear to the Paris club (a group formed by creditors) and which risks complicating the negotiations in progress, under the aegis of the International Monetary Fund (IMF).
This rise in power of China in the financing of the development of Sri Lanka fills a void left by the development banks. “After being raised, in 1997, to the rank of intermediate income countries in the lower tranche, Sri Lanka gradually lost access to most concessional funding,” said the two economists.
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