Colombo crisis: Chinese loans sound the alarm for the international community

The country of Sri Lanka has become a simple example of falling prey to China’s debt trap diplomacy as the unprecedented economic and social crisis Chinese extend loans to Colombia and other international communities

Colombo: Sri Lanka’s economic crisis has become a wake-up call for the international community as the country has become a simple example of falling prey to China’s debt trap diplomacy as the economic and social crisis without precedent in the country has shown how the BIS debt trap can totally bankrupt a country.

Due to the country’s reliance on imports and borrowing for economically unviable infrastructure projects proposed by China under its Belt and Road Initiative (BRI), Sri Lanka is going through a difficult period and many other countries in Asia and Africa are also on the verge of collapse, said a report by the Europe Asia Foundation. For example, Zambia has many BRI projects like the new airport, two modern stadiums and a power station, which means they have developed an excessive debt situation.

Through the BRI, China aims to influence the whole world with Chinese standards, norms and characteristics, and as a result, the dependence of indebted countries on China becomes even greater, wrote the former Environment Minister and Member of the European Parliament, Jo Leinen in a statement. for the Europe Asia Foundation.

About 60 of the poorest countries are unable to meet their financial commitments and have become excessively indebted to China, the report reads.

In addition, alarm bells have been ringing within the international community to draw up urgent plans on how to respond and help indebted countries through certain policies, according to the Europe Asia Foundation.

China’s debt trap diplomacy has become a major cause of Sri Lanka’s unprecedented economic crisis due to the island nation’s failure to take better steps to restructure its debts in dialogue with the IMF.

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Sri Lanka has become a cautionary tale of bad government and woe as the far-reaching impact of the pandemic destroyed the vital tourism sector, then came the Russian invasion of Ukraine, which disrupted global supply chains and accelerated the inflationary spiral that led to the Sri Lankan economy in an abyss.
The three Chinese credit institutions that offer loans in Central Asia are the People’s Bank of China, the Export-Import Bank of China and the China Development Bank.

Beijing has been Sri Lanka’s largest creditor, accounting for around 10% of the country’s external debt.
Notably, Sri Lanka has entered China’s “debt trap” diplomacy and faced its worst nightmare so far.

(Except for the title, this story has no editing by HW News staff and is published from a syndicated feed.)

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