![]() ![]() The number of countries that have signed onto China’s BRI project is unclear, but is somewhere between 139 and 146, including Sri Lanka. Some believe China has expanded that monetary diplomacy approach through its ambitious Belt and Road Initiative (BRI), a global infrastructure project involving Chinese investment in infrastructure developments in parts of Asia, Africa, and Europe, as part of China’s bid to increase global influence as a growing economic power. ![]() Sri Lanka’s bloated debt to China and the Hambantota project failure are often held up as an example of the “debtbook diplomacy” that China has pursued in the last couple of decades. Over the last decade, Sri Lanka amassed a debt of $5 billion to China alone, making up a large portion of its overall foreign debt, according to the New York Times. However, the project was riddled with corruption and stalled, and Sri Lanka eventually handed over the port’s control to China as collateral after it was unable to pay back its loans. The Sri Lankan government justified the Hambantota project as a way to grow its economy as a bustling trade hub comparable to Singapore. With its finances already bleeding, Sri Lanka took out major investment loans from state-owned Chinese banks to fund its infrastructure projects including a controversial port development in the Hambantota district. The country continued to mount foreign debt without sufficient revenueĪ big part of Sri Lanka’s economic woes is its ballooning foreign debt, namely to fund its aggressive turn to infrastructure development under former President Mahinda Rajapaksa, the elder Rajapaksa sibling and two-time prime minister. On Friday, the Associated Press reported a spokesperson for the prime minister did not immediately confirm the elder Rajapaksa’s removal, saying that any such decisions would be announced by the prime minister in due time. The president’s older brother, Mahinda Rajapaksa, is expected to be removed as prime minister as part of an agreement brokered by former President Maithripala Sirisena, who defected with dozens of other members of the incumbent president’s governing party in April in protest of the Rajapaksas’ poor governing.īut the country’s power struggle may have sown discord between the two brothers which could exacerbate its political impasse. The Rajapaksa administration also implemented sweeping tax cuts in 2019, slashing the value-added tax (VAT) rate - the tax applied to imports and domestic supplies - from 15 percent to 8 percent, which contributed to a decrease in the country’s revenue. Many attribute Sri Lanka’s economic crisis to the mishandling of its finances by successive governments through mounting foreign debt and continued infrastructure investments. Sri Lanka currently has about $7 billion in total debt due this year. Signs of Sri Lanka’s impending economic crisis became increasingly apparent over the last two years of the Covid-19 pandemic as food prices soared and power blackouts increased in frequency. At issue is the country’s economic future, which is in shambles after defaulting on payments on its mountain of foreign loans - estimated to be worth $50 billion - for the first time since the country gained independence from the British in 1948. The resolution would create a coalition made up of all parties in Parliament and would remove the grip of the Rajapaksa family dynasty currently ruling the country. After a month of intense civilian-led protests over Sri Lanka’s deteriorating economy, President Gotabaya Rajapaksa agreed to appoint a new council on Friday to lead the formation of an interim government.
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