Sri-Lanka Again Turns To Beijing For Money But China Stuns India With A New Strategy For Colombo?

China has granted a $90 million in aid to the debt-strapped island nation of Sri Lanka for the purpose of ‘medical care, education, water supplies’. This has come at a time when Beijing has attained a negative image over its ‘debt trap’ strategy aimed at gaining influence in the region.

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Following a visit by the Chinese delegation, led by former foreign minister Yang Jiechi on the request of Sri Lankan President Gotabaya Rajapaksa, Beijing decided to help out its strategic neighbour. 

Reportedly, the grant is a way to disprove China’s image of investing huge sums of money in mega projects through its Belt and Road Initiative (BRI) to later gain control over its strategic partners by piling debt obligations on them. 


“Many geopolitical analyses interpret this project as a ‘debt trap’ set up by China to gain control over Sri Lankan affairs. I want to prove that it is not the case and that this large-scale project will help improve the living standards of the people. Assist us in this endeavour,” Rajapaksa told the Chinese delegation, according to a statement released by his office.

Nivard Cabraal, minister of money and capital market and state enterprise reforms talking to Nikkei Asia said: “If we have to go and hold the International Monetary Fund’s (IMF’s) hand — or if the IMF has to hold our hand — that, I think, is a danger signal.” “We know we have to get our debt situation under control. Do we need the IMF to say that? No.”

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Earlier, Sri Lanka had relied heavily on China to construct $1.5 billion port in Hambantota in the country’s south. After the port was operating at a loss and couldn’t generate enough revenue to repay the loan to Beijing, the port was leased to China for 99 years in return for $1.1 billion which eased its position.

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According to the estimates by the IMF, Sri Lanka’s net government borrowing, which combines the fiscal deficits of the central and regional governments, will rise to 9.4% of the gross domestic product in 2020, up sharply from last year’s 6.8%, due to the economic impact of the epidemic.