ECONOMYNEXT — Sri Lanka opposition legislator Shanakiyan Rasamanickam, who has been on the warpath with Beijing over an apparent lethargy in helping the crisis-hit island nation restructure its debt, has warned of a “China, go home” protest campaign similar to the “Gota, go home” protests that unseated the country’s powerful former president in July.
The Tamil National Alliance (TNA) MP told parliament on Friday December 02 that Sri Lanka owes 7.4 billion dollars to China, a nearly 20-trillion dollar economy, and if the latter was was a true friend, it would agree to either write off this debt or at least help restructure it.
Nearly a fifth of Sri Lanka’s public external debt is held by China, according to one calculation.
“If China, who has nearly 20,000 billion dollars, is truly Sri Lanka’s friend… offering 9 million litres of diesel or half a million kilos of rice isn’t real help,” said Rasamanickam, speaking in Sinhala.
“I say to China and the Chinese embassy that, as 22 million Sri Lankans irrespective of ethnic or religious differences got together to say ‘Go home, Gota’, don’t push us to a place where we will be saying ‘China, go home’,” he said.
The Batticaloa district lawmaker has been raising his voice in parliament and elsewhere in recent days over what he claims is a hesitance on the part of China to assist in Sri Lanka’s debt restructuring efforts. The 2.9 billion dollar extended fund facility (EFF) that the International Monetary Fund (IMF) has offered to extend to the island nation is contingent upon the successful restructure of this outstanding in addition some stringent reforms that experts say are long overdue.
Colombo has been vague at best on the status of ongoing restructure talks with Sri Lanka’s creditors, and opposition lawmakers and others have expressed concern over what seems to be a worrying delay. Rasamanickam and others have claimed that China, Sri Lanka’s largest bilateral creditor, is the reason for the apparent standstill.
Addressing parliament on Wednesday, the TNA MP said China was not Sri Lanka’s friend but rather a friend of former President Mahinda Rajapaksa’s. He pointed to the Colombo Lotus Tower and the largely unused convention centre in the southern Rajapaksa stronghold of Hambantota as examples.
“What have the Chinese done in this country? If you look at the [Chinese built] Hambantota Port, China has taken it over. Tell me a single investment that the Chinese have made in this country where Sri Lankan people have been given employment [besides labour]. There’s not a single industry,” he said.
“They have forced investments down this country thanks to the Rajapaksa family. Investments that are useless,” he added.
If China was a true friend, the MP reiterated, it would help the IMF programme.
“There is no democracy in China, no human rights, Uyghur Muslims are being detained and ‘rehabilitated’. Is such a country trying to turn Sri Lanka into a state like that, a state that doesn’t respect human rights? Is that what China wants?”
The Twitter account the Chinese Embassy in Colombo, known for its sardonic tone, was quick to respond. It said the MP’s understanding of the issue was wrong and incomplete.
“Sorry Mr. MP, your understanding is incorrect and incomplete. China is the biggest supporter to Sri Lanka in fighting COVID=19 and livelihood relief, including in your district Batticaloa. China is also the first responder to Sri Lanka”s financial crisis since its default in April.”
Sorry Mr. MP, your understanding is incorrect and incomplete.
China is the biggest supporter to Sri Lanka in fighting COVID19 & livelihood relief, including in your district Batticaloa.
China is also the first responder to LK's financial crisis since its default in April:
— Chinese Embassy in Sri Lanka (@ChinaEmbSL) November 30, 2022
“As a major shareholder of IMF, China has been encouraging IMF and other international financial institutes to promptly support Sri Lanka. China actively participated all the creditors’ meetings of Sri Lanka, and China is not the only or the largest creditor of the island,” the embassy said in a five-tweet long thread.
China also funded the Norochcholai coal plant, the best investment the country has made since Mahaweli projects of the 1980s, according to the Auditor General of Sri Lanka.
However, China gave several monetary instability loans to Sri Lanka from 1980s onward when forex shortages emerged from money printed under flexible inflation targeting, sometime called ‘bridging finance’ in Sri Lanka.
China on track to bail out Sri Lanka with US$1.25bn in 2018
Sri Lanka signs US$500mn loan with China Development Bank
Sri Lanka inks deal for RMB2.0bn loan from China Development Bank
Such loans are were not tied to growth creating reforms unlike budget support loans given by the World Bank and the Asian Development Bank (ADB).
India also gave credit lines to Sri Lanka in 2022 as forex shortages emerged. Analysts say India has stepped up its lending to countries in the South Asian region, in a bid to counter Chinese influence.
The Modi government is now funding a 500 million dollar, 7km bridge linking Malé, the capital of the Maldives, to a number of islands in the archipelago, four years after Chinese engineers built a 2km bridge from Malé to the airport.
India has lent over 32 billion dollars to foreign governments in lines of credit since Modi came to power in 2014, and “development” assistance has doubled to 107 billion dollars from 55 billion dollars in 2014, according to the Financial Times.
Indian companies have also expanded in South Asia over the recent years.
Analysts, however, say that India has a long way to go to catch up with China.
Meanwhile, a Johns Hopkins University research authored by Sri Lanka’s Umesh Moramudali and Thilina Panduwawala noted that Chinese lending at the end of 2021 came to 19.6% of public external debt, much higher than the often-quoted 10-15% figures.
During 2008-2021, the effective interest rate on overall Chinese lending averaged 3.2%, higher than average rates on Japanese,
World Bank, and ADB loans to Sri Lanka (0.9%-1.6%). But Chinese rates were significantly lower than Eurobonds which averaged