Sri Lanka’s currency crisis is aggravated by China’s debt trap diplomacy

January 13, 2022 01:05 STI

Colombo [Sri Lanka], Jan 13 (ANI): Sri Lanka’s currency crisis is aggravated by its inability to meet financial obligations initiated in cooperation with China on several projects.
According to Singapore Post.
The Belt Road Initiative provided commercial loans for infrastructure projects without the strict conditionality normally imposed by multilateral development banks that dragged Sri Lanka into the financial crisis.

Earlier, analyzing Sri Lanka’s debt pattern, a recent (October 2021) report by the United Nations Conference on Trade and Development (UNCTAD), said the country was suffering from a lack of long-term financing. term for manufacturing and infrastructure.
Combined with a liberal trade regime, this led to a balance of payments crisis, currency devaluation and dependence on foreign loans. Sovereign bond repayments cannot be easily negotiated or restructured, which worries policymakers, Singapore Post reported.
The Sri Lankan government mainly relies on China for all kinds of support. Following the ban on fertilizers, she relied on importing Chinese organic fertilizers. This has also been mired in controversy due to quality and contamination issues. To make matters worse, China pressured the Sri Lankan government to pay $7 million as an out-of-court settlement as compensation amid the currency crisis, as reported. observed the Singapore Post.
Earlier, the crisis forced the Sri Lankan government to announce a new economic relief package worth $1.2 billion to restless farmers and the general public, including government workers and pensioners.
Meanwhile, Sri Lanka is currently using foreign exchange term finance facilities and a line of credit (LoC) for the import of essential commodities from friendly and neighboring countries, as highlighted by Singapore. Post. (ANI)