Stringer Asia Logo
Share on Google+
news of the day
in depth
Sri Lanka Crisis
  • Ranil Shriyan Wickremesinghe
    Ranil Shriyan Wickremesinghe
Quick recap: Sri Lankan President Gotabaya Rajapaksa is no longer in the Maldives. On board a Saudi airliner he is said to have left the archipelago for Singapore. While in his country there are street riots against the dramatic economic crisis that has brought the population to their knees, the head of state, on the run for days, has promised who will resign but has not yet formalized, in black and white, the end of his office. Meanwhile, Prime Minister Ranil Wickremesinghe, who took over as interim president, proclaimed the state of emergency and imposed a curfew. The news of his appointment, considered illegitimate by the demonstrators, have triggered a new wave of protests: a few hundred people attacked the headquarters of the state TV and the premier's residence, but were rejected by the police. Rajapaksha and his family, who for years have occupied key positions in Sri Lanka's politics and economy are guilty, according to the population, of having led the country to bankruptcy. In a literal and not in a figurative sense. Food is literally missing, and not for a few days. There is no fuel, there is a shortage of medicines, and those that are there have become so expensive that they cannot be purchased by most of the population. The prices of basic foods have tripled, and there is also no gas for cooking. The problem, reduced to the bare minimum, is that Sri Lanka is almost completely dependent on foreign imports for food and fuel needs and that, at the moment, it has hardly any foreign currency reserves to pay for the aforementioned imports. Rajapaksha and his team, to explain the disaster, taked it out on the pandemic that has blocked travel for two years, virtually eliminating one of the main active items in Colombo's trade balance: tourism. True, but not completely. Because that of Sri Lanka is, and for some years now, an announced disaster. It all began, more or less, with the ambitious construction project of the port of Hambantota years ago: part of the even more ambitious Chinese development and connectivity project called the 'Belt and Road Initiative'. The Hambantota case has now become a textbook case among experts to explain the 'debt trap' in which China pushes governments unwary enough to sign up for the BRI. To finance the construction of Hambantota, the Sri Lankan government borrowed money, on more than expensive terms, from Chinese banks. Finding himself in dire straits almost immediately, given the almost nil immediate revenues from the investment, he found himself unable to repay the debt. At that point, Beijing requested the port as collateral for the loan, forcing the government to entrust the management (and revenues) for 99 years to the China Harbor Engineering Company. And that was just the beginning. In fact, CHEC 'won' in June 2021 a new development project for a 17 km elevated highway in Colombo. The terms of the agreement give CHEC ownership of the highway, to recover the capital and earn profits by eventually returning the highway to the Sri Lankan government after 18 years. But there's more: CHEC is in fact a subsidiary of the state-owned China Communications Construction Company. Using the same technique, the CCCC has built Mattala International Airport and is building the port city of Colombo. This is the same CCCC that was blacklisted by the Trump administration in 2020 for illegally building militarily strategic islands in the South China Sea. The CCCC was also blacklisted in Bangladesh in 2018 for attempting to bribe a senior government official when the company was negotiating with Dhaka the expansion of a major highway in the capital. CHEC and CCCC were also protagonists in Sri Lanka of various corruption scandals, and for having heavily interfered in the political life of the country. Chinese Ambassador Qi Zhenzhong visited last year the Tamil North of the country to woo Tamil minority with a trip to Jaffna and Mannar. National Alliance leader MA Sumanthiran, MP, has come out strongly against Chinese entry into the North, reflecting the general anti-Chinese sentiments of Tamils. They have not forgotten China’s help to Sri Lanka to crushing the Eelam struggle in 2009. Ambassador Qi has also made a strong pitch for resuming the negotiations for an FTA with Sri Lanka, which was stalled after six rounds of talks. “We are open to discuss any concerns and China will be flexible so we can ensure early harvest for Sri Lanka” he said. The FTA will also help Sri Lanka to become a sub-distribution hub for Chinese firms to set up manufacturing operations and serve global markets. He cited the example of Cambodia, a low-income country, which had greatly benefited from its FTA with China. Last but not least, China it is said to have financed, in 2015, the electoral campaign of former president Mahinda Rajapaksa, brother of the current president Gotabaya. Who, last January, in a desperate attempt to avert the crisis, had asked Chinese foreign minister Wang Yi on a visit to Sri Lanka to restructure the debt repayment plan to cope with the rapid deterioration of the financial situation. He had asked for facilitated conditions for the payment of Chinese exports to Sri Lanka, which amounted to about 3.5 billion dollars, and for Beijing to allow, subject to strict anti-Covid protocol, the return of Chinese tourists to the country. Obviously Wang Yi, after declaring at a press conference that the 'debt trap' is all Western propaganda and promising a ship loaded with rice, has returned home. To make matters worse, Gotabaya's reckless and populist policies were also destabilisingh the country: in 2019, in order to be elected, he had promised (and carried out) substantial tax cuts: an estimated net loss, according to the same government, of about 1 , 4 billion dollars. Not only that: in the pitiful attempt to stem the need for foreign currency to pay for imports (and to pay back the Chinese), Rajapaksa and his government have taken further measures feed them when not harmful. They began by banning the importation of all unnecessary goods (including shoes), by implementing monetary policies not worthy of the name and, above all, by blocking imports of chemical fertilizers. In particular, they decided to suspend imports of Chinese fertilizers found, as well as expensive, decidedly poor by asking India for help. Which not only provided fertilizers but, also in January, had temporarily averted the financial crisis with various credit openings by providing financial aid of approximately 1.9 million dollars to Colombo. But it wasn't enough. The 6.5 billion dollars that Sri Lanka owes to Beijing weighs like a stone, and the Chinese proposal to increase Colombo's foreign currency reserves by exchanging the Sri Lankan rupee for Chinese currency (the same proposal was made at the time ago from China to Pakistan) was not well received. The Colombo government has asked for further help from India, the World Bank and the International Monetary Fund and the Chinese are said to have not taken it well. Meanwhile, Prime Minister Wickremasinghe declared that his priority, at the moment, is "to ensure three meals a day" to the population. That, if the rest of the world does not intervene, it risks finding itself in the not too distant future, having to use Chinese currency and work, dress and eat in the manner of Beijing.
Francesca Marino