China diplomat outlines complicated causes of Sri Lanka’s debt crisis

In a meeting with the Sri Lankan envoy to Beijing, the foreign ministry’s head of Asian affairs points to the developed world’s fiscal policies and sanctions

China has pledged further help on top of its emergency humanitarian funding but remains tight lipped on hoped-for loan and credit line

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Queuing for gas in Colombo, Sri Lanka where a debt crisis is causing widespread shortages of basic items. Photo: AFP

Published: 12:32pm, 10 Jun 2022

The fiscal policies and sanctions of developed countries are behind Sri Lanka’s debt crisis, a senior Chinese diplomat said in a meeting with the South Asian nation’s envoy to Beijing Palitha Kohona on Thursday.

The foreign ministry’s head of Asian affairs Liu Jinsong said the reasons developing countries such as Sri Lanka had fallen into debt difficulties were “very complicated”.

“One of the background [issues] is that some developed countries have implemented quantitative easing policies for a long time,” he said, according to a ministry statement.

“The interest rate hikes and [shrinking] balance sheets have caused drastic change to the international financial situation, and shock waves to developing nations.”

Liu said global supply and industrial chains had been further affected by the “unilateral sanctions and tariff barriers of some big nations, and the build up of small circle blocs”.

“This has exacerbated the soaring prices of commodities such as energy and food, and caused economic and financial problems in developing countries including Sri Lanka,” he said.