Sri Lankan Economic Crisis Inflicted by Self-Serving Elite

By Anis Chowdhury and Jomo Kwame SundaramSYDNEY and KUALA LUMPUR, Apr 19 2022 (IPS) Once deemed a basic human needs success story, Sri Lanka (SL) is now in its worst economic crisis since independence in 1948. Nonetheless, SL’s ‘moment of truth’ now offers lessons for other developing countries. China scapegoat SL has just defaulted on its foreign debt for the very first time. Attributing its current predicament to a Chinese ‘debt-trap’ is a new Cold War propaganda distraction – which we will undoubtedly hear much more of. Anis ChowdhuryIn this fable, SL is a country caught in a debt trap due to white elephant projects mooted and financed by borrowings from China. Blaming SL’s debt crisis on Chinese loans is not only factually wrong, but also prevents understanding the origins and nature of its current crisis. Outstanding SL government foreign debt in April 2021 was US$35.1bn. Policy errors have reduced foreign direct investment (FDI), exports and government revenue, changing the composition of its foreign debt for the worst. Debt to the Asian Development Bank (ADB), World Bank, China, Japan and other bilateral lenders, including India, came to about a tenth each. Borrowing from capital markets – 47%, or almost half – is mainly responsible for its debt unsustainability. After all, borrowing from multilateral development banks – mainly the World Bank and ADB – and bilateral lenders are mostly on concessional terms, while debt from commercial sources i...
Source: IPS Inter Press Service - Health - Category: International Medicine & Public Health Authors: Tags: Asia-Pacific COVID-19 Economy & Trade Financial Crisis Headlines TerraViva United Nations Trade & Investment IPS UN Bureau Source Type: news