Because rising foreign debt due to Chinese investment is becoming a problem for Sri Lanka's budget and economy, Sri Lankan Finance Minister Ravi Karunanayake appealed to China to partially relax the immense foreign debts. A bulk of the government expenditure goes into servicing them, Kuranayake said. Foreign debt could rise up to 94% of Sri Lanka’s GDP this year, compared to 65% in 2013 and 36% in 2010. This could result in a debt crisis forcing Sri Lanka to take up new loans in order to square existing loans. Sri Lanka’s budget could be up to 6.8 percent of GDP this year instead of the budgeted 4.4 percent. The first budget of the newly elected government will be presented to parliament in November.
Almost 70% of the Sri Lanka’s infrastructure projects are funded by China and built by Chinese companies. Many of those projects, initiated under Sri Lanka’s former strongman President Mahinda Rajapaksa, have been halted due to corruption investigations. Beijing in return halted investment to support Sri Lanka’s economy. Particularly the stalled Colombo Port City project has caused debates between Beijing and Colombo.
In order to appease China, defence ministry officials insinuated, that the docking of Chinese naval ships in Sri Lankan ports could be reconsidered, after this permission given the previous Rajapaksa government has been suspended in order to reassure India, after Sri Lanka had become a significant gateway for China to South Asia and Africa.
President Maithripala Sirisena himself expressed deep appreciation to China and stressed the traditional ties of his own party with China’s ruling Communist Party and said, he expects cooperation from China to overcome the challenge of poverty.
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