Sri Lanka seeks US$1 billion loan from China as it struggles to recover from Easter Sunday attacks
- The country is in talks with China’s Asian Infrastructure Investment Bank to provide the new loan in addition to the US$1.2 billion obtained from international agencies this year
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Sri Lanka’s former government borrowed heavily to roll-out ports, motorways and railways, but several ambitious infrastructure projects ended up as white elephants and left the country facing a mountain of debt – mainly to China.
Next Hambantota? Welcome to the Chinese-funded US$1.4 billion Port City Colombo
Unable to service its loans, the government of Prime Minister Ranil Wickremesinghe leased a Chinese-built port at Hambantota to a Beijing company for US$1.12 billion in 2017.
The government expects tourism to decline 30 per cent this year as a result of the suicide bombings. The loss of revenue has been estimated at US$1.5 billion.
The minister’s remarks came as the census department said the country’s economic growth in the first quarter of this year was 3.7 per cent – better than the 3.5 per cent forecast by the authorities.
That compares to 1.79 per cent in the final quarter of 2018 and 4.02 per cent a year earlier.
Last month, the Central Bank of Sri Lanka cut its main lending rate by 50 basis points to 8.5 per cent to encourage borrowing and mitigate any fallout from the bombings.
Forty-five foreigners were among the dead from the April 21 suicide attacks and nearly 500 people were wounded.
The government has begun subsidising loans to hotels which were already suffering a declining in foreign guests following last year’s political crisis.
The country had plunged into turmoil in October when President Maithripala Sirisena sacked his Prime Minister Ranil Wickremesinghe and called fresh elections.
Sri Lanka rejects fears of China’s ‘debt-trap diplomacy’
However, the Supreme Court held that the president’s actions were illegal and restored the status quo. But, three international credit rating agencies downgraded the country’s debt making it more expensive to borrow abroad.
