Crisis-hit Sri Lanka looks to China for help, but will it step in?

Colombo has asked for US$1 billion loan to meet repayments and a US$1.5 billion credit line to buy Chinese goods

Analysts say Beijing is likely to be cautious but will face pressure to be part of international assistance

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Protesters shout slogans in front of the presidential secretariat in Colombo, Sri Lanka on Thursday. Photo: EPA-EFE

Published: 9:00am, 15 Apr 2022

Sri Lanka is seeking to enlist China’s help as it grapples with its worst economic crisis in decades, but analysts expect Beijing to be cautious about opening its chequebook.

They say China – facing its own economic downturn – has been more careful about spending on projects in its Belt and Road Initiative since the pandemic began, and that it does not want to fuel accusations of “debt-trap diplomacy”.

The crisis in Sri Lanka is deepening, with mass protests calling for the resignation of President Gotabaya Rajapaksa. Sri Lanka on Tuesday said it would default on its external debt pending a bailout from the International Monetary Fund – the first time the South Asian nation has announced a debt default since its independence in 1948.

On Wednesday, Sri Lankan Finance Minister Ali Sabry met China’s ambassador to Colombo, Qi Zhenhong, to discuss the nation’s economic situation. Qi said China would always support Sri Lanka in “trying times”, according to a Chinese embassy tweet.

Sri Lanka has asked China for help – including a US$1 billion loan to meet repayments on existing Chinese lending and a US$1.5 billion credit line to buy Chinese goods – but so far Beijing has not indicated whether it will provide financial help.

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