In recent developments, Sri Lanka’s Prime Minister, Dinesh Gunawardena, revealed that China has committed to aiding the island nation in the development of its vital deep sea port and the main airport in the capital. This announcement came after productive discussions between Gunawardena and his counterpart in Beijing.
Highlighting the significance of China’s support, Gunawardena stated that China, being Sri Lanka’s largest bilateral creditor, has agreed to assist in restructuring the country’s external debt, a crucial step in retaining a $2.9 billion IMF bailout package.
While the specifics of China’s stance on debt restructuring remain undisclosed, Sri Lankan officials have indicated that China may be open to extending loan tenures and adjusting interest rates, though reluctant to write off any portion of its loans.
Sri Lanka’s financial woes came to a head in 2022 when the country faced a shortage of foreign exchange to fund essential imports, leading to a sovereign default on its hefty $46 billion foreign debt. Subsequent protests prompted the departure of then-president Gotabaya Rajapaksa.
Gunawardena’s office further disclosed that Premier Li Qiang assured continuous support for Sri Lanka’s debt restructuring efforts and offered assistance for the country’s economic development.
Specifically, China has pledged support for the expansion of Colombo International Airport and the development of the Hambantota port. Notably, a Japanese-funded expansion project for Colombo airport had been stalled following Sri Lanka’s debt default.
Hambantota port, situated on the island’s southern coast, was leased to a Chinese state-owned company for 99 years in 2017 for $1.12 billion, raising concerns about security implications, particularly for regional rival India. Both India and the United States have expressed apprehensions regarding China’s increased presence in Hambantota, fearing it could bolster its naval dominance in the Indian Ocean.
Despite assurances from Sri Lanka that its ports will not be utilized for military purposes, India remains wary of Chinese research vessels docking at Hambantota, fearing potential espionage activities.
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