Sri Lanka: on the Threshold of Decline
Sri Lanka: on the Threshold of Decline
  • Jeong Ha-jin
  • 승인 2022.09.07 15:30
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  Sri Lanka has run out of foreign reserves. In April, Sri Lanka defaulted on $51 billion of failing foreign debts. People suffer from a shortage of food, fuel, and medicine to live. Thousands of protesters demanded that the dictatorship withdraw. As a result, President Gotabaya Rajapaksa was ousted.
  The most decisive cause for the situation is a ‘bigger debt than repayment ability.’ Sri Lanka has a high dependence on imports. Because of the pandemic, the tourism industry, the main economy, collapsed. Sri Lanka lost its ability to earn foreign currency. The corrupt regime influenced Sri Lanka’s ability to repay, as well. Sri Lanka developed a big hole in its finances due to the dictatorship and unclear politics. Han Dong-geun, a professor in the Department of Saemaul Studies and International Development at Yeungnam University, emphasized repayment ability rather than debt. He noticed: “Many developing countries borrow money from abroad to invest. It is for achieving rapid infrastructure development. We should not think of debt as just a bad thing. The most important is investment ability after attracting foreign capital.”
  In Sri Lanka, anti-Chinese sentiment has risen. Public sentiment sees the Belt and Road Initiative as the source of this crisis. The Belt and Road Initiative is China’s external policy to create a new Silk Road connecting inland areas to the sea. One of the policies is providing large loans. The issue of Sri Lanka’s Hambantota port, which was built with a large-scale loan from China, came to the surface and fueled public sentiment. As the continued deficit of the port, an 80% stake was sold to China in 2016. After that, control of the port passed to China for 99 years. According to the Sri Lankan government, foreign debt to China is about 10 % of the total foreign debt. 
  The Yeungnam Observer asked Professor Han about the possibility of Sri Lanka’s recovery. Professor Han answered: “Everything depends on the choice and will of Sri Lankans. A transparent government, competent officialdom, and the nation’s will to build a clean country should be well matched for good use of foreign capital.” He also mentioned the need to look back on Korea’s debt management capabilities. He said Korea is also taking advantage of its debt, so the government’s ability to manage debts greatly impact the nation’s finances.

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