Comments by "Valen Ron" (@valenrn8657) on "Gravitas: CIA chief blames Lanka's 'dumb bets' for crisis" video.

  1. In the mid-2000s, Colombo (the commercial capital of Sri Lanka) agreed to let Beijing build a new port from scratch in the town of Hambantota, in the south of the island. It wasn’t yet thought of as part of a new Silk Road -- that programme was conceptualizsed by Xi Jinping in 2012 -- but all the ingredients were there. "Chinese funds and engineers are mobilised to build infrastructure outside China, as part of a partnership that was meant to be win-win: this is the very definition of the rationale of the Silk Road," said Jean-François Dufour, economist and director of DCA China-Analysis. The Chinese president integrated the Sri Lankan project into his Silk Road initiative in 2013. But in 2015, financial clouds began gathering over the future of Hambantota’s port, which cost $1.1 billion. Sri Lanka was crumbling under the debt, and was unable to repay the more than $8 billion in loans it had taken from China for several infrastructure projects in the country. Furious, Beijing turned up the heat and threatened to cut off financial support to the island nation if it didn’t quickly find a solution. In December, 2017, after two years of negotiations, Colombo finally agreed to turn over the port to China for 99 years in exchange for the cancellation of its debt. The concession was humiliating for Sri Lanka, while "the opponents of China, like India, painted the entire operation as a deliberate plan to acquire strategic positions in the region," Dufour said. China was suspected of intentionally strangling Colombo with loans at a 6 percent interest rate, which was much higher than the other lenders - such as the World Bank – from which Colombo had previously borrowed.
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  2. How do Chinese loans compare with others? By 2020, Sri Lanka's inability to honor maturing external debts was looming. The International Monetary Fund put the island's foreign debt at $38.6 billion, or 47.6% of the central government's total debt. China's slice was 10%, as was Japan's, placing the leading bilateral lenders after the main foreign creditors, international sovereign bondholders and the Asian Development Bank. But the cost of borrowing from China set that debt apart. Numbers crunched by Verite Research, a Colombo-based think tank, show that the interest rates on Chinese loans averaged 3.3%, versus 0.7% for Japan's. And the maturity period averaged 18 years for Chinese debt, shorter than India's 24 years and Japan's 34 years. None of this hindered the Rajapaksas' appetite for Chinese credit, opening the door for the Asian powerhouse to fund over a third of 313 debt-funded projects in post-conflict Sri Lanka.
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