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Tuesday May 28th, 2024

Sri Lanka ate the Chinese chicken instead of collecting eggs: Academic

The Chinese built Colombo Port City is being termed the ‘Gateway to South Asia’. Pic by Amitha Thennakoon.

ECONOMYNEXT – Sri Lanka has not used Chinese debt appropriately to grow the economy after the end of the civil war, akin to eating a chicken instead of allowing it to lay eggs, a former diplomat cum academic said.

“The Chinese approach is giving the chicken to you and letting it lay eggs,” Institute of International Affairs Director Yiwei Wang said in Colombo on Monday.

Speaking at a Ceylon Chamber of Commerce forum on the Belt and Road Initiative, he said China intended for Sri Lanka to use the debt to develop itself.

However, after the end of the civil war, the government kept borrowing without creating strong economic growth, getting Sri Lanka stuck in endless debt, Wang said.

“When the economy is not growing you can’t pay it. So, the debt grows more and more. It is endless.”

Wang said the Chinese government has invested 90 billion rupees in Sri Lanka over the past six years.

Many investments come through Chinese state-owned enterprises, although some of the largest to build a port, airport and a convention centre in the Southern coastal town of Hambantota, had been made much earlier.

An AidData and Asian Society Policy Institute study titled ‘Silk Road Diplomacy’ said Sri Lanka has been the third-highest recipient of Chinese investments in Central and South Asia totalling 12.7 billion US dollars.

Pakistan was leading with 38.43 billion US dollars, followed by Kazakhstan with 32.87 billion US dollars.

Wang said China’s approach to financing is fundamentally different from the west.

“The western approach, which we have seen in Africa and Sri Lanka, is like giving you the chicken and you eat the chicken as a chicken soup. That way you will be on huge debt,” he said.

He said China did not trap Sri Lanka in debt.

“Many people talk about the debt. Yes, even China bought money in the beginning, from the Asian Development Bank. A huge amount of money. There is no trap.”  Wang said.

“If it is a trap, then 137 countries should be in that trap now.”

The Belt and Road Initiative (BRI) is a global development strategy adopted by the Chinese government in 2013 involving infrastructure development and investments in 152 countries and international organizations in Asia, Europe, Africa, the Middle East, and the US.

Jayanath Colombage, additional secretary (foreign affairs) to the President,  too backed Wang, saying Sri Lanka is in a debt trap not because of China but due to a poor economy.

“We have mismanaged our economy. We did not make the use of money we borrowed. And we don’t want to blame somebody else for that.” Colombage said. (Colombo/Jan28/2020) 

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Sri Lanka president’s UNP proposes postponing elections by two years

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — Sri Lanka’s United National Party (UNP) has called for a referendum to postpone both presidential and parliamentary elections by two years to extend President Ranil Wickremesinghe’s term to continue ongoing economic reforms.

UNP general secretary Palitha Range Bandara called on the main opposition Samagi Jana Balawegaya (SJB) and the leftist opposition formation National People’s Power (NPP) to support the move.

At a press conference on Tuesday May 28, Bandara said postponing the two elections would not be undemocratic as it would be the result of elected representatives in parliament passing a motion, followed by a referendum.

Defending the proposal, he recalled the controversial decision by then Prime Minister Sirimavo Bandaranaike to postpone elections in the 1970s, which resulted in the decimation of her Sri Lanka Freedom Party (SLFP)-led alliance.

Bandara said that all parties must understand that now is not the time for elections as the economy has yet to emerge from bankruptcy and that President Wickremesinghe must be permitted to carry out his reforms which have already brought stability.

The UNP’s latest statement is a far cry from its pronouncements as recently as last weekend that the presidential election would definitely be held between September 17 and October 18 this year, followed by the parliamentary elections in early 2025.

UNP spokesmen also boasted that Wickremesinghe would not only contest the presidential poll but would also win it.

Tourism and Sports Minister Harin Fernando told reporters that Wickremesinghe would definitely contest the election, in response to some speculation that the president may opt to sit out.

“I think President Wickremesinghewill himself reveal his plans next week or one of these days,” said Fernando.

“He will definitely contest. I said he would for sure. Not only will he contest, he will also win,” he added.

Labour Minister Manusha Nanayakkara concurred.

“President Wickremesinghe will definitely win the election,” he said, adding that the president has provided much relief and that the economy continues to recover having fallen to its lowest point. (Colombo/May28/2024)

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Sri Lanka reforms have started to yield positive outcomes: State minister

ECONOMYNEXT – Sri Lanka’s State Minister of Finance Shehan Semasinghe says reforms have lead to positive incomes, including an increase in reserves.

“The reforms have started to yield positive outcomes, reflecting significant progress in multiple areas. Sri Lanka’s gross official reserves have seen a significant increase, reaching USD 5.5 billion by the end of April 2024,” Semasinghe said on social media platform X (twitter).

“Additionally, the Sri Lankan rupee has appreciated by approximately 8 % against the US dollar so far in 2024. This will boosts investor confidence and enhances the country’s ability to manage external shocks and meet international obligations and enhance confidence on the economy.

“The appreciation of the rupee can help lower inflation and reduce the overall cost of living and make it easier for the government and businesses to service foreign debt, thereby improving our financial reputation globally. Further, will improve the trade balance by potentially reducing the trade deficit.”

Sri Lanka’s inflation was 1.5 percent in the 12-months to April 2024, measured by the widely watched Colombo Consumer Price Index, data from the state debt office showed.

The CCPI Index fell 0.8 percent, to 195.2 points in the month of April after falling 1.9 percent in March.

Sri Lanka’s central bank has been operating largely deflationary policy, since September 2022, except perhaps in December 2023, and also allowed the rupee to appreciate in the balance of payments surplus it created.(Colombo/May28/2024)

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Sri Lanka risks foreign retaliation over VFS visa deal

ECONOMYNEXT – The Maldives could take reciprocal action after Sri Lanka’s new system of outsourcing its visas, which requires the payment of “processing” and “convenience” charges of 26 dollars, even though the government does not collect any fees.

Maldivian authorities have reminded Sri Lanka of the long-standing bilateral agreement under which their citizens could travel freely between the two neighbours without any charges or bureaucratic barriers.

A one month stay is available without a fee.

Maldivians, who consider Sri Lanka their second home, often spend more than a month in the larger country, but are now required to pay 26 dollars to VFS Global, which has controversially been contracted to handle Sri Lankan visas.

“The Sri Lankan government will not charge a fee, but Maldivians still have to pay VFS after applying online for a visa,” a Maldivian government official said in the capital, Male. “This violates the spirit of our agreement.”

He said the new administration of President Mohamed Muizzu was taking up the issue with Sri Lankan authorities in both Male and Colombo.

In a worst-case scenario, the Maldives will be compelled to reciprocate the new cost of a Sri Lankan visa and charge Sri Lankans traveling to the archipelago. There are also expat Sri Lankans in the Maldives.

There are only a handful of countries to which Sri Lankan passport holders can travel without any visa restrictions.

Singapore is another country which could take action against Sri Lanka if the bilateral deal is found to be violated, according a source said.

Opposition parties have said in parliament that outsourcing the visa handling to VFS Global and their partners was a bigger corruption scandal than the bond scam of 2015 and 2016, when billions of rupees were stolen through insider deals. (COLOMBO/May 28, 2024)

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