Sri Lanka needs cooperation, not conspiracy theories, to resolve debt

Illustration: Chen Xia/Global Times

Illustration: Chen Xia/Global Times

Ahead of Sri Lankan Prime Minister Dinesh Gunawardena’s visit to China, which began on Monday and continues through Saturday, foreign media outlets have again hyped the so-called “debt trap” theory, but such an outrageous lie is not beneficial for the Sri Lankan economy. 

Sri Lanka is now in a critical period of development and economic recovery. What is needed is an effective means to strengthen cooperation with its partners, including China, rather than promoting conspiracy theories.

According to AFP, the IMF has urged a speeding up of negotiations to ensure the debt sustainability of Sri Lanka. 

IMF mission chief for Sri Lanka Peter Breuer said last week that “we look to see swift progress … (in) reaching agreement with the commercial creditors, the international bondholders, and also China Development Bank,” the report said. 

Some foreign media outlets took the chance to again hype the “debt trap” theory in order to discredit China and try to drive a wedge to disrupt economic cooperation between China and Sri Lanka.

It should be noted that China has been doing what it can to help Sri Lanka restructure its debt. Chinese Foreign Ministry spokesperson Wang Wenbin said in October 2023 that China is ready to work with relevant countries and international financial institutions to jointly play a positive role in helping Sri Lanka navigate the situation, ease its debt burden and achieve sustainable development. 

China has also called on multilateral institutions and commercial creditors to take part in Sri Lanka’s debt restructuring based on fair burden-sharing. 

There has been a lot of discussion worldwide over Sri Lanka’s debt restructuring, but less attention has been paid to the nation’s economic recovery. Breuer said last week that Sri Lanka’s economic situation is “gradually improving.” 

It’s particularly noteworthy that growth turned positive after six consecutive quarters of contraction, with an expansion of 1.6 percent year-on-year in the third quarter of 2023 and 4.5 percent in the fourth quarter.

Sri Lanka is emerging from an unprecedented economic crisis that imposed significant hardships on its people in recent years. 

China and Sri Lanka share great potential for cooperation in the fields of trade, investment and tourism, which will foster a rapid and sustainable recovery in the Sri Lankan economy. 

Deepening cooperation means China will buy more Sri Lankan black tea, sapphire, spices and garments, and send many tourists to the island country. New momentum will be given to Sri Lanka’s economy.

There is great potential for cooperation related to the Colombo Port City in Sri Lanka. The Port City was designed as a financial, residential and entertainment hub in the Indian Ocean region. 

Citing Price Waterhouse Coopers Consulting, the Xinhua News Agency has reported that the project will attract more than $9.7 billion in foreign direct investment for Sri Lanka during its development and operation, generate more than $5 billion in fiscal revenue, and create more than 400,000 quality jobs for the locals.

The US announced a $553 million project in 2023 to build a deep-water container terminal in Sri Lanka’s Port of Colombo as it competes with China in international development financing, the Associated Press reported. 

Sri Lanka has a favorable geographical location and advantageous natural conditions. Therefore, the island country should make full use of its geographical advantages to boost trade and attract foreign investment.

From this perspective, what is crucial now is to transform its advantages into a driving force for sustainable economic growth. If Sri Lanka makes good efforts in this regard, promoting sustainable economic development, increasing employment and improving tax revenues, then its debt pressure will be greatly alleviated.

The author is a reporter with the Global Times. [email protected]