On Wednesday, Sri Lanka’s Prime Minister announced that China has committed to developing the island nation’s strategic deep-sea port and the capital’s airport following discussions with his Chinese counterpart in Beijing.
Prime Minister Dinesh Gunawardena stated that China, being Sri Lanka’s largest bilateral creditor, would provide assistance in restructuring the country’s external debt, a crucial requirement for maintaining a $2.9 billion IMF bailout package. While China’s stance on debt restructuring remains undisclosed, Sri Lankan officials have indicated that China may be hesitant to write off its loans but could consider extending loan tenures and adjusting interest rates.
In 2022, Sri Lanka faced a foreign exchange crisis, leading to a sovereign default on its $46 billion foreign debt. Subsequent protests resulted in the resignation of then-President Gotabaya Rajapaksa.
Gunawardena’s office revealed that Premier Li Qiang pledged continuous support for Sri Lanka’s debt restructuring efforts and offered assistance in economic development.
Gunawardena also mentioned that China proposed assistance in the development of Colombo International Airport and Hambantota Port, although specifics were not provided. The expansion of Colombo airport, previously funded by Japan, had been stalled since Sri Lanka’s sovereign debt default.
Hambantota Port, situated on the island’s southern coast, was leased to a Chinese state-owned company for 99 years in 2017 for $1.12 billion, sparking concerns about security implications for regional rival India. Both India and the United States have expressed apprehensions that Chinese control of Hambantota could enhance its naval presence in the Indian Ocean.
Despite Sri Lanka’s assurances that its ports will not serve military purposes, India has objected to Chinese research vessels visiting Hambantota, fearing potential espionage activities.
