Sri Lanka Daily Mirror Reflects the Truth About the ‘China Debt Trap’ Lie
June 4, 2019 (EIRNS)—The Daily Mirror of Sri Lanka refuted the lie that the Colombo government is unable to repay its loans to China, by pointing out that its debt to China was less than what it owes to commercial banks, other nations, and multilateral institutions, such as the Asian Development Bank and Japan.
In its June 3 editorial, “China-Lanka Relations, Its Debt Burden, and China’s BRI,” the editors begin by describing the Indian Ocean island-nation’s long relations to China, dating from at least 400 A.D. More importantly, Sri Lanka, only freed from the British Empire in 1948, established relations with the People’s Republic of China in 1950 and cosponsored the P.R.C. membership in the United Nations. In 1952, during a Sri Lanka famine, China hastened to purchase Sri Lanka rubber, paying higher than market prices, in exchange for Chinese rice at below market prices. Accompanying this depiction of the two nations’ true friendship, is a global map of the Belt and Road Initiative (BRI), which clearly shows Sri Lanka’s crucial role in both the Silk Road Economic Belt and Maritime Silk Road.
With that, and more as background, the editorial goes on to explain that according to Central Bank figures, the country’s full foreign debt burden in 2018 was $55 billion: 14% of that is owed to the ADB; 12% to Japan; 11% to the World Bank; and 10.6% to China. The country’s foreign debt accounts for 77% of GDP. It will have to pay $17 billion worth of debt between 2019 and 2022, mainly to commercial banks and to traditional multilateral donors. With currency reserves of $9.1 billion and a poor balance of payments record, the country has a general debt problem, in which China is only one, and far from the largest, of the country’s creditors, as opposed to Japan, the largest single nation creditor. It also reports that some of the loans China has made were used to pay other debt obligations, not those of China.
If Sri Lanka is in a debt trap, it is with the ADB, Japan, the World Bank and other foreign creditors. It certainly is not a China debt trap.