China, Sri Lanka at loggerheads over interest rates
Posted on November 21st, 2016

COLOMBO – While the world focused on Donald Trump’s shocking victory at the US Presidential Election, another global superpower was at loggerheads with tiny Sri Lanka after a senior minister in the Sri Lankan government accused China of lending money to the island nation at much higher interest rates than the accepted lending rates.

Sparks have been flying since the beginning of November between Sri Lanka’s Finance Minister Ravi Karunanayake and Chinese Ambassador Yi Xianliang, after the Ambassador had claimed that many in the Sri Lankan government including Karunanayake had made statements to the effect that the interest rates on the Chinese loans were expensive. Some ministers say our interest rates are expensive, this is unfair,” Xianliang said. He had also questioned as to why the Sri Lankan government was then seeking more loans if the interest rates were already so ‘high.’

The Ambassador said China considers Sri Lanka a ‘friend country’ and therefore offers loans at a much better rate than other nations do to Sri Lanka. We give loans to developing countries like Sri Lanka at 2% interest and not 5% like most other countries,” he said.

Sri Lankan people and the government must have gratitude,” Xianliang said. He also claimed that the Sri Lankan government took loans from Europe last year, with a high interest rate of 5.8% against China’s 2%.

However, in response to the Ambassador’s statement, Karunanayake said that in the past, China had granted loans to Sri Lanka at an interest rate in excess of 5%. The Finance Minister emphasized that development loans are usually given out at 2%, while commercial loans are granted at an interest rate between 6% to 8%. But, Chinese loans had been given to Sri Lanka at an interest rate in excess of 5%,” he said, while adding that even international lending agencies grant loans at an interest rate of less than 2%.

When Xianliang said that his country gives loans at a 2% interest rate to developing countries like Sri Lanka, Karunanayake was quick to retort that, if that was the case, then the present government was happy to pay the loans at a 2% interest rate.

If they (China) gave us loans at an interest rate of 2%, then we are ready to pay the same 2%. But, I reject the Ambassador’s statement, and we are taking every effort to reduce the interest rate from China,” Karunanayake added, while also denying the Ambassador’s claim that his government had taken any loans from any European country.

As the verbal battle ensued between both Karunanayake and Xianliang, Sri Lanka’s foreign ministry had to intervene to settle matters by telephoning the Ambassador. Even though the foreign ministry initially decided to summon Xianliang to the ministry, on advice from the higher authorities, it was decided against the move, as it could antagonize the Chinese government, and put a strain to the recently renewed relations between the coalition government and China.

Following the statement by the Ambassador, Sri Lanka’s foreign secretary Esala Weerakoon telephoned Xianliang to officially express the Sri Lankan government’s concern over the matter. During the conversation, Weerakoon told Xianliang that he should not communicate his concerns about any issue through the media, and instead they should be directly discussed with the government. The Sri
Lankan government also communicated to the Chinese government that they are prepared to discuss any concerns that may have arisen following the row.

However, the Chinese government was quick to defend it’s envoy’s statement claiming that the Ambassador had only ‘clarified’ misunderstanding and misleading statements in relations to Sri Lanka and China’s cooperation. The Chinese Ambassador to Sri Lanka exchanged views with friends from the media on China-Sri Lanka relations and the status quo of bilateral cooperation and clarified some misunderstandings and misleading remarks regarding China-Sri Lanka cooperation at a seminar,” Chinese Foreign Ministry spokesman Lu Kang was quoted as saying to PTI.

Since President Maithripala Sirisena came to power in January last year, Sri Lanka’s relationship with China has been somewhat strained, after Sirisena and Prime Minister Ranil Wickremesinghe suspended the US$1.4 billion offshore development project known as the ‘Colombo Port City’ citing corruption and procedural irregularities, just months after taking office.

The Chinese funded project was the brainchild of ex-President Mahinda Rajapaksa who is well known for his pro-china stance. During, Rajapaksa’s term, the relationship between the two countries was at an all-time high, specially after China offered military support to Sri Lanka to fight the Liberation Tigers of Tamil Eelam (LTTE), bringing a quarter century long war to an end, with the leader of the group, V. Prabhakaran being killed by the Sri Lanka military in 2009, and subsequently China investing in almost every infrastructure project during Rajapaksa’s rule, post war.

However, pressure from China and the failure of Sirisena and Wickremesinghe to secure significant foreign funding from other countries to kick-start various other development projects led to the lifting of the suspension of the project. It was given the green light mid this year, after several changes were made to the original agreement and the project was rebranded as the ‘Colombo International Financial City’.

Since coming to power, the current government continues to claim that it is saddled with a massive debt left by the Rajapaksa administration. Premier Wickremesinghe told Parliament this year that his government had to pay a debt of almost Rs. 10 trillion (Sri Lankan Rupees) which was left by the Rajapaksa administration, borrowed heavily for various extravagant projects including an unused international airport in ex-President’s hometown, Hambantota.

During a visit to China in April this year, Wickremesinghe has been attempting to renegotiate the terms of an US$8 billion debt Sri Lanka owes China, taken during Rajapaksa’s tenure. We’ve been talking with some companies and also the government of China about the possibility of some infrastructure projects becoming public-private partnerships, in which, part of the debt will become equity held by the Chinese companies,” he told reports in China during his visit.

By the end of 2015, China has completed infrastructure construction projects worth US$15.5 billion in Sri Lanka, which includes airports, ports, highways and other development projects, majority of which was carried out during Rajapaksa’s administration.

5 Responses to “China, Sri Lanka at loggerheads over interest rates”

  1. Ananda-USA Says:

    The Yamapalanaya government is SO WRONG to ALIENATE the GREATEST FRIEND Sri Lanka ever had in the People’s Republic of China.

    The Yamapalanaya is selling out the country that BEFRIENDED Sri Lanka in its TOME IF GREATEST NEDD to curry favor with, India which spawned separatism and terrorism in our country, and the USA and other Western Powers opposed to China, who will never help Sri Lanka the way China had.

    These Western nations give a pittance of aid here, and a pittance of aid there, and use the IMF and the World Bank to convert Sri Lanka into a captive debtor nation like Greece, interfering in and dictating onerous conditions that amount to a loss of national sovereignty. Sri Lanka has been transformed into a slave state.

    That was the PRICE the Yamapalanaya scammers paid for assistance in the REGIME CHANGE they helped to orchestrate to climb into power to enrich themselves.

    All of the DISASTERS now befalling Sri Lanka including it’s IMPENDING division into a FEDERAL STATE with a near sovereign proto-EELAM empowered as a stepping stone to eventual secession from Sri Lanka. This is WORSE than the BETRAYAL to the British Colonial power on March 14, 2815.

    Is it for this that tens of thousands of our herioc armed forces personnel sacrificed their lives, and hundreds of thousands of our fellow citizens died at the hands of murderous seperatists in a war we endured over 30 years. Is it for this that many of those heroes are now languishing in government prisons as a prelude to being convicted of war-crimes while the real war criminals get away scot free with 40% of our Motherland as a farewell gift?

    Someday, very soon, the leaders of this TREACHEROUS GOVERNMENT will be held ACCOUNTABLE for ALL THESE CRIMES they havr committed against the sovereign people of Sri Lanka.

    I have NO DOUBT WHATEVER about that! They know not what they do, as they dig their own graves deeper and deeper every passing day, alienating the vast majority of the people of Sri Lanka!

  2. SA Kumar Says:

    MPENDING division into a FEDERAL STATE with a near sovereign proto-EELAM empowered as a stepping stone to eventual secession from Sri Lanka !

    So our 2000 Years ( since Elra(Eela Raj)) old day dream not fare away !!!

    My Chignkala brother why this kolaveri ???

    live & let’s live in United Mother Lanka like Indian are living in Union States of India !!!!

    Fully implement 13A & 6A together !!!

  3. Ananda-USA Says:

    SA Kumar,

    A merely UNITED mother Lanka will not survive as one country, only a UNITARY motherlanka without the 13A and without a Federal PC system can survive in peace.

    I have often told you that the Tamil people are their worst enemies, and the IMPENDING carving out of a proto-EELAM out of Sri Lanka will prove to be their undoing …. AGAIN.

    I FEAR that lots of Sinhala and Tamil people will again die together on the ALTAR of EELAMIST RACISM and GREED!

    Too bad a majority of Tamil people have not decided to co-exist with their Sinhala countrymen, and have not suppressed the EELAMISTS among them and allowed them to take control of the Tamil Community again to push a separatist agenda.

    Earlier Tamild pleaded “we can’t do anything against Prabhakaran’s murderous minions” but now Tamils are again allowing Prabhakaran’s minions to take over in peacetime! This time, knowing what has already happened, there is NO EXCUSE that we Sinhala people can accept.

    This will not end well.

  4. S.Gonsal Says:

    During, Rajapaksa’s term, the relationship between the two countries was at an all-time high, specially after China offered military support to Sri Lanka to fight the Liberation Tigers of Tamil Eelam (LTTE), bringing a quarter century long war to an end, with the leader of the group, V. Prabhakaran being killed by the Sri Lanka military in 2009, and subsequently China investing in almost every infrastructure project during Rajapaksa’s rule, post war.

    This statement is very misleading, if not a BIG LIE. China did not offer “Military Support”, they sold weapons to Sri Lanka. Other countries too sold weapons, Pakistan in particular , on urgent basis.
    When our forces cornered LTTE and was about to completely eradicate terrorism during JR’s time, China only provided “military support by mouth” saying ” NO ONE SHOULD TOUCH SRI LANKA”.

    USA on the otherhand provided military intelligence for us to destroy weapon carrying LTTE ships.
    However, when the west did not sell us weapons, China sold us.

    China’s connection with countries are commercial , secretive and sometimes morally wrong.

    This is how a Chinese government run company advertises , even now.

    We are looking for these foreign agents of partners who have close connection with President, Prime Minister, Power or electricity Ministers, Governors, Finance Minister, or other Industrial Ministers to work with us for infrastructure projects on government-to-government financing basis. If you these connection, please contact us at: ——- for billions USD projects, you as our local agents or partners, we are EPC contractor and financing arranger/facilitator from China.

    Nevertheless it is the duty of our politicans and authorities to obatin the best out of China or any other country. National interest FIRST, not my pocket or my MOLES bankc account first ! I repeat DUTY. We pay no GRATITUDE for fulfilling DUTY or tradinbg with us, but we RESPECT valuing honesty , being straight and transparent.

  5. SA Kumar Says:

    I have taken your comments ,
    I totally agreed Unitary Sinhala Lanka is right solution for all us .
    We are divided society now. all thanks goes to DS to MR & Chelava/GGP to VP. you know what I mean.
    set forward is united now to achieve Unitary Sinhala Island .

    Hope & pray Lord Bhudda help us to end well !!!

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