05/19/2022, 14.17
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Sri Lanka crisis and the weight of Chinese loans

by Arundathie Abeysinghe

With the Rajapaksas in power, Beijing financed infrastructure projects that were often unnecessary and overpriced. The port and airport in Hambantota district are the most striking examples. China holds 10 percent of Colombo's external debt, like Japan, but at much higher interest rates.



Colombo (AsiaNews) - Sri Lanka has taken on large debts, much of it with China, to make up for years of budget shortfalls and trade deficits. However, several governments have squandered colossal sums on imprudent infrastructure projects, which have further drained public finances and led to the current economic meltdown.

Between 2010 and 2015, during the second term in office as president of Mahinda Rajapaksa - who recently resigned as premier in the wake of street protests against his brother Gotabaya's government -  the Chinese lent Colombo billion to finance a number of infrastructure initiatives. Some of the most important, such as the Mattala International Airport and the Magampura Port, are located in Hambantota district, the electoral stronghold of the Rajapaksa family. 

The two megaprojects are actually expensive and unnecessary "white elephants." According to airport and aviation sources, 9 million was spent on the Mattala airfield. Built with the aim of landing Airbus A380s, which cannot do so at the capital's Bandaranaike International Airport, Mattala's is the only airport in the world to be ignored by international airlines. Because of this, Mattala Airport has had difficulty meeting its financial targets and recovering its construction costs.

Moreover, according to environmentalists the airport is located in what used to be an "elephant corridor." Even after the opening ceremony, wild pachyderms roamed the facility's spaces. The airport is also located along a migratory bird route, with which many aircraft have collided.

Political analysts note that "this airport is a dip in the quagmire of national politics, geopolitical maneuvering, raw corruption and China's hunger to invest in massive infrastructure projects" along its Belt and Road Initiative, the Silk Road of the 21st century.

The most egregious case of an unnecessary facility, however, remains the port of Magampura, which is considered economically unsustainable. In 2017, the port of call was leased to a Chinese company for 99 years in exchange for non-payment of debts contracted with Beijing-for many observers, an example of a "debt trap" used by Beijing to take control of some infrastructure included in the Belt and Road.

As Nikkei Asia reports, the International Monetary Fund estimates that Sri Lanka has an external debt of .6 billion: 46.7 percent of the national public debt. China's share is 10 percent, the same as Japan's, except that Beijing's required interest rate averages 3.3 percent, while Japan's stops at 0.7. This has not deterred the Rajapaksas from financing one-third of the 313 infrastructure projects launched in the country after 2009 with money from China.



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