Let bygones be bygones, Colombo urges Beijing, as Chinese loans take their toll
Sri Lanka is urging China to put their disputes behind them and help the South Asian nation through one of its worst financial crises ever, caused partly by excessive Chinese loans contracted by the previous government of Beijing ally Mahinda Rajapaksa.
“Chinese loans are a big part of our problem. A bulk of the government expenditure goes into servicing them,” Finance Minister Ravi Karunanayake told the South China Morning Post in an exclusive interview.
“I urge China to put the acrimony of the past behind us and come and help us by adjusting the terms of the loans to make them more viable. We are serious about putting our relationship on the right path and mending the pathetic finances we have inherited from a corrupt regime.”
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Relations between Colombo and Beijing have been strained since Rajapaksa was ousted in January’s presidential election. The new unity government of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe has put on hold several Chinese infrastructure projects alleging graft.
Beijing this month rushed a special envoy, Vice-Minister of Foreign Affairs Liu Zhenmin, to Colombo to engage the unity government, reinstated by parliamentary elections in August.
Nearly 70 per cent of the infrastructure projects in the country in the last six years have been funded by China and built by Chinese companies. With foreign debt shooting up since China started pouring concrete and money into Sri Lanka, economists now say the country is heading into a debt crisis.
“In 2010, foreign debt was 36 per cent of the GDP (gross domestic product). By the end of 2013, it was about 65 per cent, and is estimated to rise to 94 per cent this year,” said Palitha Ekanayake, a former director-general at the ministry of rural economy. “Debt instalment and interest obligations already exceed government revenue. That means we have to borrow to square existing loans.”
