Stalled Chinese project in Colombo to start again
Posted on March 26th, 2015

Courtesy Shanghai Daily

WORK will resume on a stalled Chinese-backed port development in Colombo, Sri Lanka’s president said during his visit to China yesterday.

Sri Lanka had halted the US$1.4 billion port city project citing a lack of government approvals, straining ties with its biggest investor. China says the project is in line with local laws and cancellation would deter foreign investors.

China has poured millions of dollars into infrastructure in Sri Lanka since the end of a 26-year civil war in 2009.

President Maithripala Sirisena told Chinese President Xi Jinping that work would resume after problems were sorted out,” a Chinese foreign ministry official told reporters.

He stressed that what happened around the port city in Colombo is rather temporary, and he said the problem does not lie with the Chinese side,” said Liu Jianchao, assistant foreign affairs minister.

Sirisena welcomes more investment from China and promises a healthy investment climate, Liu said.

The port city was part of a deal reached between China and Sri Lanka under the former Sri Lankan government.

However, the new government, which took office in January, had decided to re-examine it.

Sirisena had vowed to reconsider deals between China and his predecessor Mahinda Rajapaksa, saying they were not transparent enough.

Xi urged Sri Lanka to protect the legitimate interests of Chinese companies.

One Response to “Stalled Chinese project in Colombo to start again”

  1. Leela Says:

    The mini budget by the newly installed minority government of Sri Lanka had increased the public sector salaries substantially with no productivity improvement or funds in the treasury. It also offered stacks of welfare benefits that the country could ill afford. All done as a bribe for the up-coming parliamentary elections. It is obvious that RaviK’s mini budget has set Sri Lanka on a steep economic slide.

    On March 17, Prime Minister RanilW told parliament that Lanka’s foreign dollar reserves were down from 9.2 billion in June 2014 to 6.17 billion by March 13, 2015. Mind you, that is the 60 days achievement of the new government’s 100 day program. Desperate for cash government servants, PM, RanilW has send his FM to negotiate a $4 billion loan from IMF purportedly to restructure high-interest Chinese loans taken for infrastructure projects. IMF has rejected the request outright, not because our foreign reserves were ‘high’ as FM claimed when summed up the failure, but IMF disagreement on the regime’s spending.

    With cheap IMF money not coming, Ranil/Chandrika/Sirisena regime resorted to borrow from international markets at commercial rates. Needless to say, such loans are much more costly than Chinese project funding.

    During Chandrika regime, Sri Lanka debt to GDP ratios was all time high 103.2% in 2001. MR brought it down to 78.3% by 2014 and foretasted it to be below 70% by 2015. Bad economic management by this government let debt/GDP ratio to rise from 78.3% low in 2014 to 88.9% today.

    The IMF also says, the 7% predicted growth is not practical now for it was dependent mainly on infrastructure projects, tourism and remittances from expatriate Sri Lankans. Now that Chinese are extremely unhappy over Ranil/Chandrika/Sirisena government’s handling of their on going projects in Sri Lanka, it is doubtful they’ll fund any of our future infrastructure projects. With the deterioration of SL rupee, will expat remittances keep rolling in as before? Will Modi’s offer of $1.5 billion to fund a currency swap agreement plug our large hole? I think we’re in for rude shock sooner than later.

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