China-backed projects attest to Sri Lanka’s mismanagement -by Ecork

China is Sri Lanka’s largest bilateral lender and holds at least 10% of its external debt of $51 billion.

Hambantota, Sri Lanka:

An airport without planes, a revolving restaurant without restaurants, a debt-laden sea port – Sri Lanka’s economic crisis has been exacerbated by China-funded projects that are negligent effects of government profligacy.

The South Asian island nation has borrowed large sums to plug years of budget and trade deficits, but has wasted huge sums on ill-advised infrastructure projects that have drained even more public finances.

It is now in the grip of the worst financial crisis since independence from Britain in 1948, with its 22 million people suffering from blackouts and severe food and fuel shortages.

After weeks of largely peaceful protests calling for the government to resign over its economic mismanagement, matters turned violent on Monday after government supporters clashed with protesters, killing five people and wounding at least 225 others.

Several of the white elephant projects that helped fuel the crisis are now gathering dust in the Hambantota region, home of the powerful Rajapaksa clan, which has used its political influence and its billions in Chinese loans in a failed attempt to turn the rural outpost into a major economic hub. .

Prime Minister Mahinda Rajapaksa – who has been tasked with several projects – announced his resignation on Monday, the same day anti-government protests turned violent.

But his younger brother Gotabaya is still president.

The focus of the infrastructure drive was the deep sea port on the world’s busiest east-west shipping lane, which was intended to stimulate industrial activity.

Instead, it bled money from the moment it began operations.

“We were very optimistic when the projects were announced and the area improved,” Dinuka, who has long lived in Hambantota, told AFP.

But that means nothing now. This port is not ours as we struggle to live.

The port of Hambantota was unable to service the $1.4 billion in Chinese loans earmarked to finance its construction, and lost $300 million in six years.

In 2017, a Chinese state-owned company secured a 99-year lease on the sea port – a deal that sparked fears across the region that Beijing had secured a strategic foothold in the Indian Ocean.

Overlooking the harbor is another China-backed extravagance: a $15.5 million convention center that has been largely unused since it opened.

Near Rajapaksa Airport, built with a $200 million loan from China, which is used so sparingly that at one point it was not able to cover the electricity bill.

In the capital, Colombo, there is the Chinese-funded Port City project – an artificial island of 665 acres created with the aim of becoming a financial center that rivals Dubai.

But critics have already begun to consider the project a “hidden debt trap.”

Biggest Binary Lender

China is the largest bilateral lender to the government and holds at least 10 percent of its external debt of $51 billion.

But analysts believe the true figure is much higher if loans to state-owned enterprises and Sri Lanka’s central bank are taken into account.

The borrowing has contributed to Sri Lanka’s acute financial predicament, after years of taking out loans to cover spiraling budget deficits and to fund imported products needed to keep the island’s economy afloat.

“The multi-decade financial profligacy and poor governance … got us in trouble,” Murtaza Jafferji, head of the Advocata Institute in Sri Lanka, told AFP.

And economic problems added to their weight after the Corona virus pandemic blew up vital revenues from tourism and remittances, making the import-dependent country unable to buy basic goods from abroad.

‘China did its best’

Sri Lanka’s government announced last month that it had defaulted on its foreign loan obligations, due to its inability to service its growing debt burden, and with a credit rating downgrade that dried up sources of new loans in the international money market.

It has sought to renegotiate the repayment schedule with China, but Beijing has instead offered more bilateral loans to repay existing ones.

That proposal was stymied by Sri Lanka’s appeal for IMF assistance – a move that has sparked panic because Chinese lenders will now likely need to reduce their loans.

“China has done its best to help Sri Lanka not to default, but unfortunately they went to the IMF and decided to default,” Chinese Ambassador Qi Zhenhong told reporters last month.

For many Sri Lankans, largely unused infrastructure projects have become powerful symbols of the Rajapaksa clan’s mismanagement.

“We got very much into loans,” said Krishantha Kolatunga, owner of a small stationery shop in Colombo.

Kolatunga’s works are located near the entrance to the Lotus Tower, a flower-shaped skyscraper funded by Chinese funds.

The tower’s stained-glass facade dominates the capital’s skyline, but its interior – and the planned revolving restaurant with panoramic views of the city – has not been opened to the public.

“What good would it be for us to be so proud of this tower if we were left begging for food?” asked Kulatunga.

(This story has not been edited by the NDTV crew and is automatically generated from a shared feed.)

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