Hambantota, Sri Lanka:
An airport without planes, a revolving restaurant without diners, a debt-laden seaport — Sri Lanka’s economic crisis has been exacerbated by China-funded projects that are neglected monuments to government extravagance.
The South Asian island nation borrowed heavily to fill years of budget and trade deficits, but squandered huge sums on ill-considered infrastructure projects that have further depleted public finances.
It is now in the throes of the worst financial crisis since Britain’s independence in 1948, with months of power outages and acute food and fuel shortages plaguing 22 million people.
After weeks of largely peaceful protests demanding the government resign over its economic mismanagement, things turned violent on Monday after pro-government supporters clashed with protesters, killing five and injuring at least 225.
Many of the white elephant projects that fueled the crisis are now turning to dust in the Hambantota district, home to the powerful Rajapaksa clan, which used its political influence and billions in Chinese loans in a failed attempt to get rid of rural areas. outpost an important economic center .
Prime Minister Mahinda Rajapaksa — who ordered many of the projects — announced his resignation on Monday, the same day anti-government protests turned violent.
But his younger brother Gotabaya remains president.
The centerpiece of the infrastructure drive was a deep seaport on the world’s busiest east-west shipping route, intended to fuel industrial activity.
Instead, the money has bled from the moment it started its operations.
“We were very hopeful when the projects were announced, and this area got better,” Dinuka, a longtime resident of Hambantota, told AFP.
“But now it means nothing. That harbor is not ours and we are struggling to live.”
The Port of Hambantota was unable to repay the $1.4 billion in Chinese loans taken out to finance the construction, losing $300 million in six years.
In 2017, a Chinese state-owned company was awarded a 99-year lease for the seaport — a deal that raised concerns across the region that Beijing had gained a strategic foothold in the Indian Ocean.
Overlooking the harbor is another China-backed extravagance: a $15.5 million conference center largely unused since it opened.
Nearby is the Rajapaksa Airport, built on a $200 million loan from China, which is used so sparingly that at one point it was unable to meet its electricity bill.
In the capital, Colombo, there’s the China-funded Port City project – an artificial 665-acre island set up with the aim of becoming a financial center to rival Dubai.
But critics have already overheard the project becoming a “hidden debt trap.”
Largest bilateral lender
China is the government’s largest bilateral lender, owning at least 10 percent of its $51 billion foreign debt.
But analysts believe the real number is significantly higher when loans to state-owned enterprises and the central bank of Sri Lanka are taken into account.
The loans contributed to Sri Lanka’s dire fiscal situation after years of borrowing to cover rising budget deficits and to finance the imported products needed to keep the island’s economy going.
“Fiscal debauchery over many decades and weak governance … got us in trouble,” Murtaza Jafferjee, president of the Advocata Institute think tank in Sri Lanka, told AFP.
The economic woes weighed heavily after the coronavirus pandemic torpedoed vital revenues from tourism and remittances, leaving the import-dependent country unable to purchase essential goods from abroad.
‘China has done its best’
Unable to pay off its mounting debt burden, as credit downgrades dry up the sources of new loans in the international money market, the Sri Lankan government announced last month that it was defaulting on its foreign loan obligations.
It had tried to renegotiate its repayment schedule with China, but Beijing instead offered more bilateral loans to repay existing loans.
That proposal was scuttled by Sri Lanka’s appeal for help to the International Monetary Fund – a move that has sparked consternation as Chinese lenders are now likely to cut their loans.
“China has done its best to help Sri Lanka not default, but unfortunately they went to the IMF and decided to default,” Chinese Ambassador Qi Zhenhong told reporters last month.
For many Sri Lankans, the largely unused infrastructure projects have become powerful symbols of the mismanagement of the Rajapaksa clan.
“We’re already neck-deep with loans,” said Krishantha Kulatunga, who owns a small stationery store in Colombo.
Kulatunga’s company is located at the entrance to the Lotus Tower, a flower-shaped skyscraper funded by Chinese funds.
The tower’s colorful glass facade dominates the capital’s skyline, but the 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 Kulatunga.
(This story was not edited by DailyExpertNews staff and was generated automatically from a syndicated feed.)