Debt Trap Diplomacy, Who Next?

Sakshi Chaturvedi
Published on: 12 Dec 2017 7:19 AM GMT
Debt Trap Diplomacy, Who Next?
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Colombo: Last Saturday, Sri Lanka handed over deep-sea southern port of Hambantota to a Chinese firm on a 99 year lease under a USD 1.12 billion deal. A state run Chinese company has taken over the control of the port which falls under world’s busiest east-west shipping route. With signing of the deal, the Lankan government has received USD 300 million. The port will be jointly managed by Sri Lanka Port Authority and China Merchants Port Holdings. On the face it, this looks like a simple business deal but this is not the case. This deal is the ‘beginning of a debt settlement’, as Lankan PM Ranil Wickremesinghe has himself declared.

Whatever, be the Chinese ambitions, the Hambantota development has brought into open the ‘debt trap diplomacy.’ Sri Lanka’s total debt is a staggering USD 64 billion and as much as 95% of government revenue goes towards loan repayments. China gave money on easy terms and with minimum hassles. During the regime of former president Mahinda Rajapakshe Sri Lanka had borrowed USD 8 billion from China for infrastructure development projects, including the port.

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Sri Lanka’s helplessness in present scenario is just an example of how mighty powers pursue their strategic interests. Many other countries are also facing similar fate. Cambodia, for example, has an external multilateral debt of USD 1.6 billion dollar whereas it owes USD 3.9 billion to China under bilateral debt. China has given USD 3 billion dollar to Cambodia since 1992.

China has invested billions of dollars in infrastructure and developments in many other smaller nations as Sri Lanka, who are forced to abide by Beijing’s dictate. China is aggressively pursuing its One Belt One Road (OBOR) which became Belt and Road Initiative (BRI) in June this year. Sri Lanka, Cambodia, Malaysia and even Indonesia have invested in the BRI on China’s promises. China under its BRI initiative, offers what smaller nations cannot refuse. China has already invested heavily on the Gwadar port in Pakistan and is investing heavily in Bangladesh as well. Pakistan is already trapped in the debt trap with more than USD 13 billion in external borrowings. In this context, these countries will have to take the offers from lenders to rescue itself from a possible economic downturn.

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It is not only China that has lent huge amounts to several countries but IMF and World Bank are also similar lenders. Greece, Venezuela, Croatia, Spain, Ukraine and many other countries are under debt of international agencies. Countries who have taken loans for so called infrastructure development cannot do anything except just wait and watch. Debt is a thing of which all developing countries are trapped in. It should be considered only the benevolence of the funding countries that have not yet their pound of flesh. But sooner or later the payback time will come, certainly.

Sakshi Chaturvedi

Sakshi Chaturvedi

A journalist, presently working as a Sub-Editor at newstrack.com.

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