Briefing Paper 8 – Evolution of Chinese Lending to Sri Lanka Since the mid-2000s: Separating Myth from Reality
November 29, 2022
Sri Lanka’s April 2022 default has brought renewed attention to Chinese lending on the troubled island. Our new briefing paper, based on Freedom of Information requests by two Sri Lankan economists, shows that loans from Chinese banks now constitute 19.6 percent of public debt, much higher than the often quoted 10 to 15 percent. All this debt was duly reported to the World Bank’s International Debt Statistics. Interest rates on Chinese loans averaged 3.2 percent – higher than Japanese, World Bank, and ADB loans, but significantly lower than Eurobonds (6.9 percent). While much commentary has charged China with “asset seizure” in the case of the lease of Hambantota Port, debt service for the Port came to only 2.4 percent of Sri Lanka’s total payments in 2017, the year the port was leased. There was no default on the port loans in 2017. Loan contracts obtained by the authors show no evidence of the port serving as collateral for the Chinese loans.
please read the report here.