Jan 02, 2018

Sri Lanka struggles to repay heavy China debt

Sri Lanka is struggling to pay the heavy debt to China it has accumulated over the years.

The country has to hand over its strategically located Hambantota port to China.

It was a major acquisition for China's Belt and Road Initiative (BRI).

Unlike International Monetary Fund and World Bank lending, Chinese loans are collateralized by strategically important natural assets with high long-term value.

Hambantota, for example, straddles Indian Ocean trade routes linking Europe, Africa, and the Middle East to Asia.

In exchange for financing and building the infrastructure that poorer countries need, China demands favourable access to their natural assets, from mineral resources to ports.

China provides huge project-related loans at market-based rates, without transparency, much less environmental- or social-impact assessments.

Under this scenario, Sri Lanka Treasury is trying to find necessary foreign funds to service a US $ 8 billion debt to China as Beijing is "willing to give" an estimated additional $ 24 billion as part of the One Belt One Road initiative.