Prime Minister Ranil Wickremesinghe yesterday denied that Sri Lanka was in danger of spiralling into a debt trap from excessive Chinese borrowing, and insisted the country was not “under threat” from trade tensions between US and China.
Speaking at the World Economic Forum in Vietnam, Wickremesinghe noted Sri Lanka had not given control of the Hambantota port to China, and strove to provide a balanced view of Sri Lanka’s debt situation.
“There is a fair amount of Chinese investment, there are China loans, but I can’t see it as a threat and the amount is not big. Our largest loans are still dollar-denominated. As far as the loan-debt portfolio is concerned, our biggest chunk today would be the international sovereign bonds. With China, we did have short term issues regarding the Hambantota Harbour and the Mattala Airport, but that has been sorted out and at least we are turning them into profitable projects,” he said.
He pointed out that China had lent significantly to a number of countries, not just Sri Lanka, but the Government was focused on managing its debt-servicing challenges, which were largely from borrowings linked to international financial markets. “China was lending money in the period from 2008 to 2014/2015. At that time, China was the main lender. There was no objection when China was lending to all the countries. We did point out that too much of borrowings can cause issues for us, but the biggest segment of debt is what we have raised on the international financial markets, and we are committed to paying them. We cannot be negotiating or renegotiating it. With China or some other country, we may have some room, but certainly not with international sovereign debt.”
Wickremesinghe also insisted the Government was focused on maintaining the currency at practical levels, and said Sri Lanka was focused on building reserves by encouraging exports and investment.
“We are staying within the fiscal limits that have been set. We have borrowed sufficient money and we are pushing export earnings. Last year, $11.7 billion was the highest export earnings we have ever had, and this year I think it’s going to be more.”
“We and many others are running deficits in Asia, and that certainly would be a matter of concern, but so far we have been able to negotiate with the rating agencies, and it has certainly not affected our borrowing capacity,” he added.
Courtesy: Daily FT