Much hype and propaganda has fooled the world and Sri Lankans into believing China has trapped Sri Lanka in debt. For every woe Sri Lanka suffers the credit is put on China. This has been the fashionable sing-song-of Colombo cocktail circles who want to dictate how the entirety of Sri Lanka think.
Sri Lanka’s economic woes have naturally being pinned on China. The ugly truth is that Sri Lanka’s foreign debt is owed to the West and not China. Holding 81 percent of Sri Lanka foreign debt the West and its allies are breathing down Sri Lanka. It is not China but the West and allies who have trapped Sri Lanka in debt. Over US$50 billion of Sri Lanka’s US$54billion debt is not held with China but the West and their allies.
IMF Genie
Eighty-one percent of Sri Lanka’s debt is held by US and European financial institutions together with their Asian allies Japan & India.
Sri Lanka has gone to the IMF 16 times and faced structural adjustments, but has structural adjustments done Sri Lanka any good?
Against 81 percent Sri Lanka’s debt held by West and its allies – Sri Lanka’s debt to China is just 10 percent.
Advocata claims China holds US$3.5b of the $54b debt Sri Lanka owes foreigners.
This means over $50 billion of Sri Lanka’s debt is not owed to China.
47 percent of this 81percent foreign debt is held by Western funds and banks.
Topping this list holding international sovereign bonds are:
* Allianz (Germany)
* Amundi Asset Management
* Ashmore Group (Britain)
* BlackRock – in 2009 acquired Barclays Global Investors (BGI)
* Fidelity Investments- US retirement system
* Hamilton Reserve Bank – holds $250m of Sri Lanka’s 5.875 percent bond due on 25 July 2022. They filed a legal suit in New York.
* HBK Capital Management
* HSBC (Britain)
* JP Morgan Chase – US retirement system
* Lord Abbett – US retirement system
* Morgan Stanley Investment Management
* Neuberger Berman – US retirement system
* Pacific Investment Management
* PIMCO – US retirement system
* Prudential (U.S.)
* Saint Kitts and Nevis accused Sri Lanka of excluding certain bondholders from restructuring accusing hanky panky by officials handling restructuring.
* Rowe Price Associates Inc – US retirement system
* UBS (Switzerland)
Sri Lanka’s defaulting is causing US retirees suffering from massive losses upto 80 percent of their original investment value was the argument raised by Hamilton Reserve Bank who took Sri Lanka to courts. Inspite of defaulting repaying on China’s loan of US$78m due in July, China’s Exim Bank has not taken Sri Lanka to court.
$12.5 billion international sovereign bonds were issued by Sri Lanka on the advice of then Governor CBSL Indraji Coomaraswamy. This was taken far before Covid-19 impacted Sri Lanka in March 2020. Sri Lanka’s current CBSL head and then Finance Minister Sabry decided to default claiming Sri Lanka was ‘bankrupt’ in April 2022.
The above three have much to answer for. Taking sovereign bonds and boldly defaulting obviously had not taken stock of how Sri Lanka was to make repayment or the repercussions of declaring Sri Lanka would not repay. Did it not occur to them that their big talk would land the nation in legal issues?
Sri Lanka has hired financial and legal advisers Lazard and Clifford Chance to renegotiate with creditors which include 30 asset managers and bilateral lending from Japan, India and China.
How much is Sri Lanka paying Lazard and Clifford Chance for their advice?
Lazard and Clifford Chance will be up against White and Case LLC the legal advisor and Rothschild and Co as financial advisers for the more than 30 asset managers that hold Sri Lanka’s international bonds.
ADB owns 13 percent of Sri Lanka’s foreign debt.
World Bank owns 9 percent of Sri Lanka’s foreign debt.
Both ADB and World Bank are US dominated with veto power.
Japan owns 10 percent of Sri Lanka’s foreign debt while Japan exerts influence over ADB.
Two percent of Sri Lanka’s foreign debt is owed to India though with the current handouts by India, the percentage would have increased.
The West and its alliances not only yield monetary control over Sri Lanka but its formation of Quad and anti-China military alliance places Sri Lanka to walk on a tight-rope with tremendous pressure using the 81 percent debt reality.
When they give – they give with undisclosed and disclosed expectations.
Thus, the West and its allies is using this 81 percent to exert tremendous pressure on Sri Lanka.
In 2015 US-India installed a puppet regime to power.
By end of 2019 – less than 5 percent of Sri Lanka’s foreign debt was held by China. 64.6 percent was in dollars, 14.4 percent in IMF SDR and 10 percent Japanese yen.
Given that China is well accustomed to the lies and distortions of Western media and can afford to ignore, can Sri Lanka do the same?
Was this 81 percent foreign debt a malady of the neoliberal policies and associated ills Sri Lanka had to suffer forcing Sri Lanka to be trapped to the West?
Was the sudden decision to default on debt primarily without repaying a debt due to China, part of a larger plan to put Sri Lanka further into West-allies debt?
If IMF bail outs have not succeeded 16 times earlier – how far is the 17thIMF bailout likely to succeed?
How did the West and its allies get away by spreading false propaganda. Where were the so-called Sri Lankan economists to set the story straight? Surely, they had all the numbers and should have told the general public the true picture?
It is not only the ‘economic experts’ who are guilty of spreading lies and distortions taking the West-Allies, anti-China stand but the local and international media are equally guilty.
“Wall Street Journal “China’s lending comes under fire as Sri Lankan debt crisis deepens.”
Voice of America: “China’s global image under strain as Sri Lanka faces debt trap’ accused China of following a debt-trap diplomacy to weaken countries to make them dependent on China. Associated Press ABC News, Al Arabiya, Al Jazeera too carried the anti-China tempo.
India Today, The Print, Wion, New Indian Express, Business Standard too echoed anti-China rhetoric attributing Sri Lanka’s economic situation to China.
Numerous think tanks across US also carried the same version as did the UK and EU news agencies.
Sri Lanka is not in debt to China.
China has not seized assets of Sri Lanka and globally there are close to 20 cases where China has helped countries out of economic crisis instead of asset seizures. China has not taken Sri Lanka to courts either. The differing aspect of West and China’s loans is the manner it looks at how a project can contribute to the future.
In fact China has cancelled more than US$3.4billion and restructured US$15billion of Africa’s debt. At no time has China exerted pressure on countries in debt.
China has shown by its 30-year development plan how to bring a nation in poverty to become a nation challenging Western hegemony. Over the past 40 years China has taken 800million out of poverty while 37.2million Americans (11.4 percent) are living in poverty.
If Sri Lanka should be seeking advice, it is from China on how to restructure State enterprises given that China has shown how to turn a poverty-stricken China to become where it is today. Sri Lanka has to seriously look away from returning to neoliberal privatisation failed models.