How is China helping Sri Lanka’s economic recovery?

March 28, 2024

China, being Sri Lanka’s largest bilateral creditor, has recently pledged to assist in the restructuring of the island nation’s external debt. This support is crucial for Sri Lanka to maintain its $2.9 billion IMF bailout. Although China’s official stance on debt restructuring remains undisclosed, Sri Lankan officials have reportedly indicated that China might be willing to extend loan tenures and adjust interest rates, rather than accepting a haircut on its loans.

Infrastructure Development

Chinese Premier Li Qiang has offered assistance to develop two key infrastructure projects in Sri Lanka:

Colombo International Airport: The expansion of the airport, which was previously funded by Japan, had been stalled due to Sri Lanka’s sovereign debt default. China’s support could potentially revive this project.
Hambantota Port: In 2017, this southern sea port was leased to a Chinese state-owned company for 99 years in exchange for $1.12 billion. China’s commitment to further develop the port could boost its operational capabilities and economic significance.

Geopolitical Implications

The development of Hambantota Port by China has raised security concerns among regional powers, particularly India. The port’s strategic location on Sri Lanka’s southern coast could potentially enhance China’s naval presence in the Indian Ocean.

Both India and the United States have expressed apprehensions that Chinese research vessels calling at Hambantota might be used for espionage. However, Sri Lanka has maintained that its ports will not be used for any military purposes.

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