China used ‘debt trap diplomacy’ to seize control of Sri Lanka: think tank

China has used its underhanded “debt-trap diplomacy” to gain a strategic advantage over Sri Lanka, an independent foreign policy think tank said on Saturday after the resignation of Lankan Prime Minister Ranil Wickremesinghe, giving way to a multi-party cabinet to take control of the country.

“In response to Sri Lanka’s financial crisis, China has used its underhanded ‘debt trap diplomacy’ to gain a strategic advantage over the nation and hold its economy hostage. The port cities of Hambantota and Colombo are leased to China for 100 years. China is now Sri Lanka’s second largest lender, holding more than 10% of Sri Lanka’s external debt stock in 2019,” Red Lantern Analytica said in a statement.

He added that Sri Lanka had collapsed as a country due to economic disaster caused by poor governance, lack of transparency, Chinese debt trap and corruption.

Sri Lanka’s GDP-to-debt ratio has been rising steadily since 2010 when the island nation’s downward financial spiral began, the statement said, adding that a rising current account deficit and a sharp drop in exports precipitated a large-scale economic crisis. in 2019.

However, when China took advantage of the situation to increase Sri Lanka’s debt burden, India lent a hand by offering financial packages consisting of a $500 million credit facility for imports of fuel and a $1 billion credit facility for essential imports from India, the think tank claimed.

Additionally, India sent $2.4 billion through currency swaps, loan deferrals and other lines of credit. However, he was unable to save Sri Lanka, which was entirely enslaved by Chinese debt and ultimately succumbed to it, the statement added.

The think tank also said that China’s economic aid to Sri Lanka was primarily a plan to gain political and security leverage against India and push ahead with its expansionist goals along the around the Indian Ocean.

“The nations of the world must learn the lessons of the fall of Colombo and avoid falling into China’s debt trap. In addition, other major powers must design development plans and infrastructure projects for the underdeveloped nations in order to halt the expansion of China’s BRI,” the statement said.



(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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