China becomes wild card in Sri Lanka's debt crisis
COLOMBO, Sri Lanka (AP) — China says its initiative to build ports and other infrastructure across Asia and Africa, paid for with Chinese loans, will boost trade. But in a cautionary tale for borrowers, Sri Lanka's multibillion-dollar debt to Beijing threatens to hinder efforts to resolve a financial crisis so severe that the Indian Ocean nation cannot import food or gasoline.
Sri Lanka’s struggle is extreme, but it reflects conditions across dozens of countries from South Pacific islands through some of the poorest in Asia and Africa that have signed onto Chinese President Xi Jinping’s Belt and Road Initiative. The total debt of poor countries is rising, raising risks others might run into trouble.
Sri Lanka's 22 million people are in dire straits. Foreign currency ran out in April, leading to food shortages, power cuts and protests that forced a prime minister to resign. Payment on $51 billion of debt to China, Japan and other foreign lenders was suspended.
Sri Lanka and other poor Asian countries welcome Chinese financing. The Asian Development Bank says the region needs to invest $1.7 trillion a year in infrastructure to keep economies growing. But some, including Sri Lankan critics of their government’s spending, say Chinese-led projects cost too much or do too little for their economies.
China ranks third among Sri Lanka's creditors after Japan and the ADB and accounts for 10% of the debt, but Xi’s government has an outsize potential to disrupt a settlement.
Beijing promised to “play a positive role” in talks with the International Monetary Fund on a possible emergency loan. China offered to lend more but balked at joining a process that might cut Sri Lanka’s debt, possibly for fear other Belt and Road borrowers that owe tens of billions of dollars will demand...
