{"id":14784,"date":"2021-04-13T00:00:00","date_gmt":"2021-04-13T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/13-04-2021\/china-extends-500-mn-loan-to-sri-lanka\/"},"modified":"2024-05-06T15:54:19","modified_gmt":"2024-05-06T10:24:19","slug":"china-extends-500-mn-loan-to-sri-lanka","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/13-04-2021\/china-extends-500-mn-loan-to-sri-lanka","title":{"rendered":"China Extends $500 mn Loan to Sri Lanka"},"content":{"rendered":"<p><strong>In News<\/strong><\/p>\n<p>Sri Lanka inked an agreement with the state-run China Development Bank for a loan of USD 500 million.<\/p>\n<p><strong>About<\/strong><\/p>\n<ul>\n<li>This USD 500 million loan is the second installment of the USD 1 billion loan (signed before), out of which USD 500 million was released in 2020.<\/li>\n<li>Beijing-based <strong>Asian Infrastructure Investment Bank (AIIB)<\/strong> also sanctioned Sri Lanka\u2019s request for a $180 million loan.<\/li>\n<li>Sri Lanka already owes more than $ 5 billion to China from past loans.<\/li>\n<\/ul>\n<p><strong>Sri Lanka\u2019s Economic Crisis<\/strong><\/p>\n<ul>\n<li>Like many pandemic-hit countries, Sri Lanka is facing an <strong>acute economic crisis<\/strong> for over a year now.<\/li>\n<li>Sri Lanka&#8221;s <strong>foreign exchange reserves dropped <\/strong>to USD 4.05 billion in March 2021, the lowest since a currency crisis in 2008\/2009.<\/li>\n<li>Sri Lanka is due to repay some $ 4.5 billion of its outstanding debt this year<\/li>\n<li>Sri Lanka hopes that the loan will infuse much-needed foreign currency to its economy in order to face the COVID-19 challenges.<\/li>\n<\/ul>\n<p><strong>Assistance by India<\/strong><\/p>\n<ul>\n<li>India extended a <strong>$ 400 million swap facility <\/strong>through the Reserve Bank of India, and provided a three-month rollover.<\/li>\n<li>The Central Bank of Sri Lanka settled the swap in February 2021.<\/li>\n<li>While PM Mahinda Rajapaksa sought a debt moratorium on the debt Sri Lanka owes to India, President Gotabaya Rajapaksa requested Prime Minister Modi for a<strong> $ 1 billion currency swap <\/strong>last year. Neither request has been cleared as yet.\n<ul>\n<li><strong>Currency Swap Agreement <\/strong>is an arrangement between two friendly countries to involve in trading in their own local currencies.<\/li>\n<li>As per the arrangements, both countries pay for import and export trade at the predetermined rates of exchange, without bringing in third country currency like the US Dollar.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong>China\u2019s Debt Trap Diplomacy<\/strong><\/p>\n<ul>\n<li>In a push to gain rapid political and economic ascendency across the globe, China dispenses billions of dollars in the form of concessional loans to developing countries, mostly for their large-scale infrastructure projects.<\/li>\n<li>These developing nations, which are primarily<strong> low- or middle-income countries<\/strong>, are <strong>unable to keep up with the repayments<\/strong>, and China then gets a chance to demand concessions or advantages in exchange for debt relief.<\/li>\n<li>China views Sri Lanka as a key player in its\u00a0 ambitious <strong>Belt and Road Initiative (BRI)<\/strong><strong>.<\/strong><\/li>\n<li>Massive debt incurred towards China to build the strategic <strong>Hambantota Port<\/strong> has been cited by experts as an example of the <strong>&#8221;debt-trap diplomacy&#8221; <\/strong>being pursued by China.<\/li>\n<li>After Sri Lanka defaulted the loan for the <strong>Hambantota Port<\/strong>,<strong> Colombo in 2017<\/strong> was <strong>forced to lease out the port <\/strong>to a Chinese company on a 99-year lease.<\/li>\n<\/ul>\n<table style=\"width: 624px;\" border=\"1\" cellspacing=\"0\">\n<tbody>\n<tr>\n<td style=\"background-color: #fff2cc; width: 468.0pt;\"><strong>Hambantota Port <\/strong><\/p>\n<ul>\n<li>It is located on the southern tip of Sri Lanka within 10 nautical miles from the world\u2019s busiest maritime lanes.<\/li>\n<li>It is ideally located at the intersection of the major international shipping routes.<\/li>\n<li><strong>Strategic importance: <\/strong>Hambantota is close to the Asian and European international shipping routes the Suez Canal and the Strait of Malacca.\n<ul>\n<li>Approximately 200 to 300 ships sail through this route daily.<\/li>\n<\/ul>\n<\/li>\n<li>This port was handed over to China Merchants Port Holdings (CMPort) on a 99-year lease by the Sri Lankan government with a payment of US$1.12 billion as the island nation couldn\u2019t pay back the funding capital debt to China.<\/li>\n<\/ul>\n<p><img decoding=\"async\" style=\"height: 344px; margin-left: 50px; margin-right: 50px; width: 393px;\" src=\"https:\/\/cfstatic.nextias.com\/cdn-cgi\/image\/format=auto\/file_library\/mix_content\/439436931589298600_image.png\" \/><\/p>\n<p>Image Courtesy: <a href=\"https:\/\/timesofindia.indiatimes.com\/blogs\/tracking-indian-communities\/chinese-trick-unviable-port-turns-strategic-asset\/\" target=\"_blank\" rel=\"noopener\">TOI<\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>Source: <a href=\"https:\/\/www.thehindu.com\/news\/international\/china-extends-500-million-loan-to-lanka\/article34305277.ece\" target=\"_blank\" rel=\"noopener\">TH<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Sri Lanka inked an agreement with the state-run China Development Bank for a loan of USD 500 million. About This USD 500 million loan is the second installment of the USD 1 billion loan (signed before), out of which USD 500 million was released in 2020. Beijing-based Asian Infrastructure Investment Bank (AIIB) also [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":14785,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[56,57,30,34],"class_list":["post-14784","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-agreements-involving-india-or-affecting-indias-interests","tag-effect-of-policies-politics-of-developed-developing-countries-on-indias-interests","tag-gs-2","tag-india-foreign-relations"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/4359073Current-Affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/14784","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=14784"}],"version-history":[{"count":1,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/14784\/revisions"}],"predecessor-version":[{"id":24322,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/14784\/revisions\/24322"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/14785"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=14784"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=14784"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=14784"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}