The Sri Lankan crisis: The curious case of China’s complicity

Analysis
By Editor_1
Weeks of unrest in Sri Lanka forced the resignation of the prime minister, Mahinda Rajapaksa, as the country reels from the pandemic, costly debt and rising food and fuel prices - Eranga Jayawardena/AP
0
By Aditya Gowdara Shivamurthy

As the humanitarian situation in Sri Lanka turns grave, the people of the island state have continued to demand President Gotabaya Rajapaksa’s resignation. Much of this anger against the Rajapaksas’ economic mismanagement and populist policies seems justifiable. But there is another reason for this crisis that remains less discussed within Sri Lanka, i.e., China.

China, however, has conveniently shifted the blame to the borrower rather than the creditor. It has held Sri Lanka responsible for the depletion of its foreign exchange reserves and long-term economic mismanagement vis-à-vis unsustainable project proposals and borrowings.

True, Sri Lanka would not have reached this situation if it weren’t for the domestic politics of populism and the subsequent governments’ economic mismanagement. But both these factors are also closely related to the China factor. Beijing’s contribution to the crisis is complicit and inseparable, and yet, it has hardly assisted its so-called all-weather friend and partner in this dire hour.

 China and the rise of Rajapaksas

The current situation in Sri Lanka is majorly a product of populism and populist policies. In this case, it is significant to assess the rise of Rajapaksas as the dominant force in Sri Lankan politics. Mahinda Rajapaksa began his first tenure as the president in 2005. He was assisted by his siblings who held key portfolios in the government, including the Secretary of Defence. Their ability to end more than two and half decades of civil war through iron-fist policies had, however, garnered mass appeal from the Sinhala nationalists. Their policies were so popular that the Rajapaksas won the 2019 elections by vastly focusing on national security alone.

But this legacy and successful end to the civil war was possible only with China’s fast-tracked and unrestricted supply of weapons, arms, ammunition, and artilleries to the regime. This was essential at a time when the West was concerned about human rights violations and India was more anxious about the plight of the Tamils. China’s lack of interest in the internal developments in Sri Lanka and their defence of the Rajapaksas against charges of human rights violations further cemented this relationship. The Sri Lankan leadership had thus found a new partner to balance the West and India and to overcome their pressure. This lack of heeding to the international pressure also strengthened their strong-man image and appealed to their Sinhala-nationalist vote bank.

Similarly, the post-war economic recovery also ushered in much-needed confidence in the leadership and the government. Here again, China’s role had been crucial. Between 2005-2015, China emerged as Sri Lanka’s leading source of development assistance and FDI. As an economically recovering Sri Lanka proposed several mega infrastructure projects, China seized the opportunity to invest in these projects. This enthusiasm was a product of China’s growing economic strength and desire to be the next Asian power. On the other hand, Sri Lanka found it easier to seek assistance from China considering its quick disbursement of loans and lack of interest in Sri Lankan domestic politics. In most cases, China also provided technical, financial, and economic assistance to these projects.

These infrastructure projects energized the country’s construction and retail activities and initiated a temporary economic boom. Although these investments lacked the potential to offer the returns, they were exhibited to the public as a showpiece of the government’s desire of transforming Sri Lanka into the next Singapore. These visible infrastructure developments accompanied by the temporary economic boom created a façade of development and thereby, strengthened Mahinda’s position further.

These post-war years were vital for the Rajapaksas to entrench themselves as the dominant players in Sri Lankan politics. And China played a pivotal role in shaping this factor of populism, which subsequently led to the unfolding disaster in the island state.

Exploiting loopholes and exaggerating structural issues

Another crucial factor in the crisis has been Sri Lanka’s economic structure, mismanagement, and inexhaustive project proposals. Here too, China’s role has been critical. Beijing saw the investment opportunities as a means to entrench its influence and investments, while the Rajapaksas used this as an opportunity to reap political and economic benefits. As a result, the Sri Lankan leadership handpicked certain Chinese firms to invest in specific projects; signed abstract agreements; promoted opaque companies and investments; accepted loans with higher interest rates than those offered by the Asian Development Bank (ADB) or the World Bank. They also rejected and made it difficult for investments from India, Japan, and the US. In return, the Rajapaksa clan enjoyed China’s external support, benefited from their election campaign funding, and also expanded their coffers.

With this political support and elite capture, these Chinese-funded projects and finances cumulated with time. And by the time Rajapaksa’s successors took over in 2015, these Chinese investments and loans were so deeply embedded within the Sri Lankan economy that any kind of disconnect with China became unimaginable. Subsequently, the Chinese investments and projects continued to flow in Sri Lanka. The return of the Rajapaksas in 2019 further fast-tracked these investments and initiatives.

Overall, China preyed on Sri Lanka’s economic vulnerabilities, loopholes, and corrupt practices for its political and economic calculations. And for Sri Lanka, the easy flow of money further emboldened the government to ignore structural weaknesses such as low levels of Foreign Direct Investment (FDI), tax revenues, failure to diversify exports, and budget and trade deficits. China’s lack of concern for the island state’s economic and political situation thus came at a cost. Sri Lanka’s unlimited proposals and consistent Chinese investments even exaggerated these structural weaknesses, thereby contributing to the current crisis.

 Unsustainable borrowing and debunking the myth of Chinese innocence

Finally, the crisis is also a product of Sri Lanka’s unsustainable borrowing. Sri Lanka has a history of sustaining its economic growth through external borrowings. In this regard, it is often asserted that Beijing is just another lender to Sri Lanka. To substantiate the argument China’s 10% of lending is often compared to 47% of lending from the private market.

True, the market lending in Sri Lanka overshadows those from China. But to counter the argument, these market borrowings are not from a single entity, and neither are these non-state actors able to change the broader geopolitical structure. Parallelly, China is the largest bilateral donor to the island state, and it has offered excessive projects and loans to the island state, despite knowing its economic and political limitations and vulnerabilities. Thereby, sucking Sri Lanka into its broader debt trap ambitions.

Interestingly, China is also the only lender whose percentage of outstanding debts is double its total debt stock. This might be for two reasons: Maturing Chinese loans in recent years or high-interest rates on the loans. Which in either case means that Sri Lanka owes more money to China. Essentially, these consistent repayments of external debts—of which China is a major stakeholder—further dried the forex reserves. Thus, contributing to the humanitarian and economic catastrophe.

Conclusion

The crisis in Sri Lanka has been in the making for the past two decades. Although a lot of blame has gone on the island state’s domestic developments, Beijing’s contribution to the crisis is inseparable. The story of populist Rajapaksas, unsustainable borrowings, and structural fallacies is essentially incomplete without the China factor. Understandably, China has conveniently blamed others for the crisis. But its mere US$ 76 million aid to the island state has also raised several critical questions over China’s reliability and ambitions and the implications of their projects, loans, and elite capture. If any country understands the significance of these questions, then distant developments such as the Indo-Pacific Economic Framework might appear even more important and personal to them than ever.

 -Aditya Gowdara Shivamurthy is a Research Assistant with ORF’s Strategic Studies Program and this article  is part of the series, The Unfolding Crisis in Sri Lanka

 

 

Editor_1
You might also like More from author

Leave A Reply

Your email address will not be published.

otc high blood pressure treatment blood pressure guidelines medications blood pressure pills that is safe for the liver high blood pressure medication levothyroxine blood pressure medication that reduces blood pressure is there any difference in blood pressure pills high blood pressure child medication blood pressure medication recommendation nose blue blood pressure medication blood pressure is 150 68 should i take my medication blood pressure medication while nursing taking a bunch of high blood pressure pills aerobic exercise and blood pressure medication good blood pressure medication acupuncture treatment for low blood pressure best over the counter pills for high blood pressure blood pressure pill amlodipine besylate high blood pressure signs and treatment moderna vaccine blood pressure medication which blood pressure drugs do not cause tinnitus blood pressure medication fights cancer blood pressure medication skin rash side effects of high blood pressure medication impotence medication to avoid on blood pressure medications high blood pressure rx medication peripheral neuropathy caused by blood pressure medication high blood pressure in pregnancy treatment nice runny nose do to blood pressure medication how to get off of blood pressure pills hiv medication and high blood pressure niacin treatment for high blood pressure two drugs for blood pressure that caused cancer high blood pressure causing medications high blood pressure medication names canada blood pressure medication side effects alcohol i take 3 blood pressure medication blood pressure pills that help with anxiety what iv drug raises blood pressure list of doctors who formulated blood pressure medications how to remember blood pressure medications sleeping pills blood pressure how fast does blood pressure medication take effect sweet n low high blood pressure medication home treatment for blood pressure high blood pressure medication matrocet high blood pressure medication doses blood pressure drug bystolic iberstaron blood pressure medication blood pressure medications st alphabetical celexa and high blood pressure medication does blood pressure pills irritation skin can i take combivent with high blood pressure medication blood pressure medications beta blockers list what to do if blood pressure medication does not work drugs to lower your blood pressure red beet pills for blood pressure taurine and blood pressure medications how ling for garlic pills to lower blood pressure blood pressure medication list and side effects can i take aspirin with high blood pressure medication blood pressure medication teaching about hot tubs water pills high blood pressure over counter what is an arb medication for blood pressure resveratrol high blood pressure medication high blood pressure medication and weight loss gum disease and blood pressure medication benzenesulfonic acid in blood pressure medication taking two blood pressure pills by mistake allergy pills for high blood pressure blood pressure prescription drugs safety blood pressure medication in pregnancy trazodone and blood pressure medication which blood pressure medication is linked to skin cancer list of blood pressure medications with the least side effects could blood pressure medication make blood thicker disadvantages of high blood pressure medication blood pressure medications ludipril typical drugs for high blood pressure otc water pills for high blood pressure blood pressure medications that do not doncause bowel blockage high blood pressure after corrosion treatment how soon does high blood pressure medication work blood pressure medication teaching amertyrine high blood pressure medication increased blood pressure and heart rate after drug overdose over the counter drugs high blood pressure blood pressure medication 25 is blood pressure medication a nitrate most effective blood pressure pills blood pressure medical does red yeast rice interfere with high blood pressure medication can apple cider vinegar pills lower blood pressure does blood pressure medication give you headaches high blood pressure medication and driving should you take blood pressure pills with food inn blood pressure drugs can you eat bananas if taking blood pressure medication popular high blood pressure medication blood pressure medication los blood pressure medication second drug low blood pressure and hypertension medication do water pills lower blood pressure high blood pressure pill aqunadine high blood pressure cholesterol medication how does medication lower blood pressure acetaminophen blood pressure medication blood pressure medication 30 mg that works around the heart what does grapefruit do to blood pressure medication can red yeast rice be taken with blood pressure medication pharmaceutical treatment for high blood pressure are blood pressure pills statins blood pressure pills that start with r blood pressure medication and male impotence taking baby aspirin with other high blood pressure medications what is the medical name for a blood pressure cuff leg cramps and blood pressure medication blood pressure pill name starts with p natural high blood pressure treatments blood pressure medication names losartan higher blood pressure with radiation treatment medical marijauna high blood pressure how to avoid medication for high blood pressure what time is best to take blood pressure medication medication for palpitations and high blood pressure latest news on blood pressure treatment what if i take two blood pressure pills does xanax interfere with blood pressure medication amlipan blood pressure medication vitamin e and blood pressure medication tell me the side effects of high blood pressure medication herbs pills to lower blood pressure blood pressure medication urge to urinate what medication will safely replace lisop as blood pressure medicine active ingredient in high blood pressure medication blood pressure medications cause adrenal tumors is biktarvy ok to take with high blood pressure medication alembic blood pressure medication sandoz blood pressure medication exercise high blood pressure medication grapefruit pills blood pressure treatment for high blood pressure at home blood pressure medication for patients with osa cycle on off blood pressure medication blood pressure drugs that do not cause heat sensitivity blood pressure medications that do not cause coughing what blood pressure medications do not cause rosacea pfizer blood pressure medication side effects do garlic pills really help lower blood pressure should i take medication for anxiety induced blood pressure treatment for uncontrolled blood pressure decongestant medication high blood pressure can stiff days be used with high blood pressure medication how long does it take medication to lower blood pressure what if i miss a blood pressure pill tribenzor high blood pressure pills law lawsuit 2023 treatment of sudden drop in blood pressure zoloft and blood pressure medication orange high blood pressure pill cancer blood pressure pill why cant people with high blood pressure take keto pills how long for blood pressure to go down mini pill should i get second opinion before taking blood pressure medication blood pressure erectile dysfunction medication high blood pressure medication m lot ben medical device lowers blood pressure puppy ate blood pressure pill are there medications for low blood pressure dod blood pressure medication is losartan a blood pressure pill combination drugs for blood pressure marijuana and blood pressure medication interaction blood pressure medication interactions with grapefruit can you eat bananas while taking high blood pressure medication steps before going on high blood pressure medication blood pressure medication when to cut down foods to avoid on blood pressure medication blood pressure medications depression blood pressure medication non beta blocker tattoos and high blood pressure medication what is the medications used to lower blood pressure quickly high blood pressure medication leg swelling blood pressure medication men in your 40s blood pressure medication wieight loss blood pressure medication hy can blood pressure medication lower blood sugar does blood pressure medication make you pee natural treatment high blood pressure during pregnancy can you take l arginine with high blood pressure medication what class of blood pressure medication can can blood pressure pills reduce appetite faa approved medication for high blood pressure high blood pressure medication during pregnancy best blood pressure medication for type 2 diabetes blood pressure and pain medication pain medication that does not affect blood pressure best high blood pressure drugs on the market if you take incorrect medications to lower blood pressure low blood pressure treatments does your body have to adjust to blood pressure medication why water pill for high blood pressure drugs for treatment of very high blood pressure during pregnancy can i drink grapefruit juice with high blood pressure medication can blood pressure pills make you feel cold high blood pressure medication that helps with weight loss amlodipine blood pressure drug blood pressure medication for infants varicose veins blood pressure medication life extension high blood pressure medication does tylenol interfere with blood pressure medication can i take diamox with other high blood pressure medications prestige medical blood pressure cuff calibration drugs used for high blood pressure chamomile tea and high blood pressure medication narcotics stored alongside blood pressure medications in does nutrigrove blood pressure pills work extremely low blood pressure treatment blood pressure medication for iga nephropathy blood pressure medication low side effects can i increase my blood pressure medication what is the best blood pressure medication to take drugs that cause increased blood pressure does biotin interfere with high blood pressure medication cani od on high blood pressure pills blood pressure medication that also helps with jerking blood pressure medication categories first line treatment of high blood pressure medication for low blood pressure in usa armour thyroid drug interactions blood pressure meds hepatitis c treatment high blood pressure high blood pressure arb drugs low blood pressure treatment with essential oils high blood pressure medication list for pregnancy blood pressure medication and snake venom blood pressure medication low dose liquid blood pressure medications ivf drugs and high blood pressure left my blood pressure medication does it matter when you take blood pressure medication can you take blood pressure pills twice a day privilin blood pressure medication how big are blood pressure pills once you start blood pressure medication can you stop diuretic in blood pressure medication what medication reduce blood pressure new blood pressure treatment prescribed home medications for high blood pressure blood pressure medication side effects forums taking blood pressure pills dizzy when bend over a lot blood pressure medication and nyquil cinnamon pills and high blood pressure temporary high blood pressure treatment single agent blood pressure medication blood pressure medication made in china fda approved medications to reduce blood pressure immediate treatment for high blood pressure at home best time to take blood pressure pills muscle loss on high blood pressure medication blood pressure medication when needed treat high blood pressure without medication blood pressure medication side effects for men cbd pills for high blood pressure blood pressure regulation without medication blood pressure medication and pre workout high blood pressure alzheimer disease and antihypertensive treatment miss blood pressure medication blood pressure pills suicide peaceful emergency drugs for low blood pressure common blood pressure medications in canada systolic blood pressure define medical viril and high blood pressure pills can statin drugs help lower blood pressure do you have to wean off blood pressure medication new drugs for blood pressure when is high blood pressure medication necessary drugs for hi blood pressure cold medications and blood pressure taking 2 blood pressure pills mistake why doctors stopped prescribing blood pressure medication common high blood pressure medication canada what side effects does blood pressure medication have ulcer medication high blood pressure can high blood pressure medication elevate alkaline phosphatase blood pressure medication warning getting blood pressure medication jamaica alkaline water and blood pressure medication blood pressure going up and down with medication drugs reduce systolic blood pressure treatment for rapid high blood pressure low blood pressure alternative treatment do all high blood pressure medications cause weight gain medication for increasing blood pressure blood pressure medication for african american males vitamins for high blood pressure treatment aleve with blood pressure medication how to lower blood pressure without pills blood pressure triple pill who blood pressure guidelines for hygiene treatment what drug reduces blood pressure blood pressure medications enalapril met blood pressure medication