Sri Lanka needs more financial assistance to bring its economy back to normal, K.K. Yoganaadan, Deputy Chief of the Mission of the Sri Lankan Embassy in China, told CGTN Radio during a recent interview in Beijing.
“Now most of the problems are under control, but not solved yet,” Yoganaadan said. “So we are seeking assistance from our neighbors and our friends and our bilateral partners to support and assist us.”
Sri Lanka used to be one of the richest economies in South Asia. But now, the island nation of 22 million people is suffering its worst economic crisis since gaining independence from Britain in 1948.
Over the past few months, residents have been enduring shortages of various essentials such as cooking gas, fuel and medicine owing to a scarcity of foreign currency to import them. Though imports of petroleum products and medicines were restored through humanitarian support from the World Bank and China, there’s still a shortage of other essential materials.
“The tourist level has gone down, our expatriates’ sending income has also gone down, and our exports have also gone down,” Yoganaadan said. “That’s why we were facing the foreign currency issues.”
Observers say that Sri Lanka’s pillar industries, including tourism and the service sector, as well as major exports like tea, textiles and garments, rely heavily on a stable international environment. The Sri Lankan economy has been negatively impacted by disturbances such as the COVID-19 pandemic and the Russia-Ukraine conflict.
In early September, the Sri Lankan government and the International Monetary Fund (IMF) reached a preliminary agreement for a loan of up to $2.9 billion to help the debt-laden nation overcome its debt difficulties.
However, the bailout package will only be granted once the IMF management and executive board approve it. The country will also need to get “sufficient assurance” from Sri Lanka’s creditors, which include China, Japan, India and other multinational agencies, that “debt sustainability will be restored.”
In response to the accusations from Western media that China has been luring Sri Lanka into a “debt trap,” Yoganaadan said, “We completely deny that.”
“If you see our loan structure, our bilateral loan to China is about 10 percent of the total loan, which is very less. And then if you compare the 90 percent of the loan, [it] goes to multilateral agencies and to other bilateral partners,” he added.
Official data from Sri Lanka’s Finance Ministry shows China accounted for 9.77 percent of the country’s $35.1 billion in external debt at the end of April 2021. Similarly, Japan accounted for 9.69 percent, while the Asian Development Bank and World Bank accounted for 12.73 percent and 9.32 percent of its foreign debt, respectively. Nearly half of its external debt, 47.25 percent, was incurred through market borrowings.
“So it’s not true that the problem was created because of Chinese help,” Yoganaadan said.