Sri Lanka has been facing the challenges of a dwindled economy for a long time. Currently, it has witnessed the worst economic crisis since independence. The continuous reliance on imports and dearth of foreign exchange reserves has brought the country to the point where it stands today. The country has been observed to be habitual in borrowing from creditor nations and international financial institutions. Although, it has been observed that the continuous reliance on IMF bailouts has brought unprecedented challenges to the domestic economy of Sri Lanka.
It would be not wrong to say that there are some other factors responsible for the worst economic crisis in Sri Lanka, upon which China stands above all. China has played a significant role in overburdening the Sri Lankan economy. Overdependence on China has resulted in the vulnerable economy of Sri Lanka. Since China has been playing an influential role in dominating the global stage, owing to which it has been using the tactics of providing small loans to South Asian states including Sri Lanka. As Beijing’s Debt Trap Diplomacy has been applied in Sri Lanka through the means of its large-scale investments in the island country.
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China’s debt trap diplomacy
To have a widespread influence over the country, Sri Lankan port cities including Hambantota and Colombo have been leased to China for 100 years. As China is the 2nd largest lender to Sri Lanka and in the same way is equally a major contributor to the economic disaster in the state. Even though China was unhappy for Sri Lanka to reach IMF for seeking economic help still it remained standing by not giving a way out for the country in times of need.
China has been exploiting the state for a long time for the fulfillment of its own expansionist goals in the Indian Ocean alongside gaining political and security leverage against India. Sri Lanka is placed on the strategic point of the Indian Ocean owing to which it ultimately paved the way for China to advance its aggressive kind of investments in maritime means as a successful strategy for the expansion of its Belt and Road Initiative.
Keeping in view the current economic recession in Sri Lanka, the question arises as to whom the country should blame for such an economic crisis?. The Sri Lankan leaders and their actions related to overdependence on China stagnated the country’s economic growth. Gotabaya Rajapaksa, who was elected in 2019 as the president of Sri Lanka, allowed China to grow its investments and widespread influence in the state without thinking about the fact that how overdependence can be burdensome for the island nation.
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In the words of one of the members of the Colombo Municipal Council, Pradeep Jayewardene, “If my grandfather had been the president, he would not have been so close to China. He kept balance in mind”. Currently, Sri Lanka is not in a position to repay its loans and experts believe that China wants to take advantage of this situation in Sri Lanka. China has been waiting for the time for turning all the past loans into an equity model, paving the way for China to have ownership of the projects it has initiated in Sri Lanka.
The way forward
Other South Asian states should learn a lesson from the factors which have brought the economic recession in Sri Lanka. As the countries of South Asia including Pakistan have been currently facing the challenges of the dwindled economy due to various factors like lack of foreign direct investments, the balance of payments, and trade deficits. However, China has been the largest foreign direct investor in Pakistan through its flagship project of China Pakistan Economic Corridor worth $6 billion.
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Pakistan has been observing stagnated economic growth owing to which China has always been the priority for its development projects. The lack of necessary funds for development projects leads the developing countries toward China in all ways and means. It is an hour’s need for the rest of the countries of the world to learn lessons from Sri Lanka’s economic recession and the way it has been made a poster child of falling into the debt trap of China. Seeking other investors for economic development instead of overdependence on one investor can protect the state from future economic disasters.
The writer is a graduate of Political Science from Kinnaird College for Women University Lahore. The views expressed in the article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.