The South Asian island nation borrowed heavily to address years of budget shortfalls and trade deficits, but spent huge sums on non-negotiable infrastructure projects that have further drained public finances.
It is now in the grip of its worst financial crisis since independence from Britain in 1948, months of blackouts and acute shortages of food and fuel crippling 22 million people.
After weeks of peaceful protests demanding the government’s resignation over its economic mismanagement, things turned violent on Monday after pro-government supporters clashed with protesters, killing five people and injuring at least 225. Went.
Many of the white-handed projects that helped address the crisis are now gathering dust hambantota district, home of the mighty Rajapaksa The clan, which used its political clout and billions in Chinese loans, in an unsuccessful attempt to turn the rural outpost into a major economic center.
Prime minister Mahinda Rajapakse – who commissioned several projects – announced his resignation on Monday, the same day anti-government protests turned violent.
but his younger brother gotabaya Remains chairman.
The centerpiece of the Infrastructure Drive was a deep port on the world’s busiest east-west shipping lane, meant to foster industrial activity.
Instead, it has bled money from the moment it started operations.
“We were very hopeful when the projects were announced and the area got better,” Dinuka, a longtime resident of Hambantota, told AFP.
“But it doesn’t make sense now. That port is not ours and we are struggling to live.”
The Hambantota port was unable to service a $1.4 billion Chinese debt to finance its construction, losing $300 million over six years.
In 2017, a Chinese state-owned company was handed a 99-year lease for the port – a deal that sparked concerns across the region that Beijing had gained a strategic foothold in the Indian Ocean.
Overlooking the port is another Chinese-backed extravaganza: a $15.5 million convention center that has remained largely unused since it opened.
Nearby is Rajapaksa Airport, built with a $200 million loan from China, which is so poorly used that at one time it was unable to cover its electricity bill.
In the capital Colombo, there is the Chinese-funded Port City project – an artificial 665-acre island set up with the aim of becoming a financial hub to rival Dubai.
But critics have already called for the project to be a “hidden debt trap”.
– Largest bilateral lender – China is the government’s largest bilateral lender and owns at least 10 percent of its $51 billion foreign debt.
But analysts believe the true number is much higher if loans to state-owned firms and Sri Lanka’s central bank are taken into account.
After years of taking out loans to cover the growing budget deficit and financing imported products needed to sustain the island’s economy, the borrowing contributed to Sri Lanka’s dire financial situation.
Sri Lanka’s chairman Murtaza Jafferji said, “Fiscal negligence and weak governance over several decades… have put us in trouble.” Lawyers Institute The think tank told AFP.
The economic crisis was exacerbated after the coronavirus pandemic torpedoed significant revenue from tourism and remittances, leaving a country dependent on imports unable to purchase essential goods from abroad.
– ‘China has done its best’ – Unable to meet its growing debt burden, and with credit rating downgrades drying up new debt sources on the international money market, Sri Lanka’s government last month eased off on its foreign debt obligations. declared a mistake.
It had sought to renegotiate its repayment schedule with China, but Beijing instead offered more bilateral loans to repay existing borrowings.
That offer was rejected by an appeal for help to Sri Lanka. International Monetary Fund — a move that has caused panic as Chinese lenders will now need to cut their loans.
“China has tried its best to help Sri Lanka not to default, but sadly they went to the IMF and decided to default,” the Chinese ambassador said. qi zhenhong told reporters last month.
For many Sri Lankans, the largely untapped infrastructure projects have become strong symbols of the Rajapaksa clan’s mismanagement.
“We are already in debt,” said Krishna KultungaThe owner of a small stationery store in Colombo.
Kultunga’s business sits near the entrance to the Lotus Tower, a flower-shaped skyscraper controlled by Chinese money.
The tower’s stained-glass facade dominates the capital’s skyline, but its interior – and a planned revolving restaurant with panoramic views of the city – has never been opened to the public.
“What’s the point of being proud of this tower if we keep begging for food?” asked Kultunga.