Lanka not caught in Chinese debt trap, says Ambassador Kohona

Sri Lanka is not caught in a debt trap of China, Sri Lankan Ambassador in Beijing, Dr. Palitha Kohona said in an interview with the South China Morning Post.

Dr. Kohona told the Post that Sri Lanka was in a difficult situation and had asked for financial support to help it get through the spiraling economic crisis which had led the government to raise interest rates, devalue its currency and curb imports of non-essential goods.

“The current situation is difficult, but it’s the result of a combination of factors really coming together at this very moment and then, naturally, people of the country are feeling the pressure and the pain, and they have the freedom to protest,” Kohona said.

“The immediate need is to meet our debt repayments, and our crying need is to finance certain imports, like petroleum, gas and other items like that. No economy can last for too long without petroleum and gas, and without electricity.”

Critics often cite the 2017 case in which the then Sri Lankan government decided to lease the strategically located Hambantota port to a Chinese state firm under a 99-year lease as part of a controversial debt-for-equity swap scheme.

Kohona said it was Sri Lanka’s own choice to build a seaport in Hambantota, a project supported by two feasibility studies carried out by a Canadian engineering firm and then a Danish consulting firm before its government sought funding from Western funding agencies, and even India, although none was interested.

“Then we approached China, and China did not rush to us with money. It took two or three years of negotiations before it was agreed that the Chinese would fund the Hambantota port,” he said. “And it’s very important to remember that the money that was received by this lease was not used to repay the Chinese loans but those taken from Western financial institutions.”