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The
support of the two regional powerhouses — and rivals — is
crucial for Sri Lanka to emerge from its worst economic crisis
in decades, which led to political upheaval and paved the way
for Dissanayake to come to power.
China was once seen as having the upper hand in Sri Lanka
through its huge loans and infrastructure investments. While
China remains the country's largest bilateral lender, Sri
Lanka's economic collapse provided an opportunity for India,
which stepped in with massive financial and material assistance
including food, fuel and medicines.
For years, China has been trying to expand its influence in Sri
Lanka, an island off India's southeast coast that the government
in New Delhi considers part of its strategic backyard.
Dissanayake’s visit to the Chinese capital can be seen as an
effort to navigate the rivalry between India and China, which
his party traditionally has leaned toward.
In New Delhi last month, Dissanayake met Prime Minister Narendra
Modi and said he would not allow Sri Lanka to be used in “a
manner that is detrimental to the interest of India.”
Sri Lanka declared bankruptcy in April 2022 and suspended
payments on $83 billion in domestic and foreign loans as a
foreign exchange crisis led to severe shortages of food,
medicine, fuel and cooking gas, along with hours-long power
cuts.
China’s support is vital for Sri Lanka to restructure its
external debt. China accounts for about 10% of Sri Lanka’s
loans, more than Japan or the Asian Development Bank.
Sri Lanka borrowed heavily from China over the past decade for
infrastructure projects including a shipping port, airport and a
city being built on reclaimed land. The projects failed to earn
enough revenue to pay off the loans, and Sri Lanka leased the
port in Hambantota to a state-owned Chinese company in 2017.
The country's crisis was largely the result of economic
mismanagement combined with the COVID-19 pandemic, which along
with terrorist attacks in 2019 devastated its tourism industry.
The pandemic also disrupted the flow of money sent home by Sri
Lankans working abroad.
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Mallawarachi reported from Colombo, Sri Lanka.
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