The Central Intelligence Agency (CIA) chief has held China responsible for Sri Lanka’s economic collapse, saying Colombo’s “dumb bets” on high-debt Chinese investment have led to the catastrophic outcomes. “The Chinese have a lot of weight to throw around and they can make a very appealing case for their investments,” William Burns said at the Aspen Security Forum on Wednesday.
“Nations should look at a place like Sri Lanka today–heavily indebted to China–which has made some really dumb bets about their economic future and are suffering pretty catastrophic, both economic and political, consequences as a result,” he added. Burns warned that the situation in Sri Lanka should be a lesson to other countries in the Middle East and South Asia.
“That, I think, ought to be an object lesson to a lot of other players — not just in the Middle East or South Asia, but around the world — about having your eyes wide open about those kinds of dealings.” Sri Lanka has borrowed from several countries, including China that turned out to be white elephant projects.
Back in 2017, Sri Lanka was forced to lease out a facility to a Chinese company for 99 years after the island nation was unable to repay a USD 1.4 billion loan for port construction in the south of the country. Earlier this year, Burns described China as the single most important geopolitical challenge for the United States in the 21st century. He characterized President Xi Jinping’s China as being in many ways the most profound test the CIA has ever faced.
This warning from the CIA comes a few days after IMF Director Kristalina Georgieva on Saturday warned countries with high debt levels to take lessons from Sri Lanka and said that it is a warning sign for nations with limited policy space. “Countries with high debt levels and limited policy space will face additional strains. Look no further than Sri Lanka as a warning sign,” the IMF chief said.
“Emerging and developing countries have also been experiencing sustained capital outflows for four months in a row. They now suffer the risk of reversing three decades of catching up with advanced economies and instead falling further behind,” she added. Sri Lanka has been facing its worst economic crisis since independence in 1948, leading to an acute shortage of essential items like food, medicine, cooking gas and fuel across the island nation.
The country, with an acute foreign currency crisis that resulted in foreign debt default, had announced in April that it is suspending nearly USD 7 billion foreign debt repayment due for this year out of about USD 25 billion due through 2026. Sri Lanka’s total foreign debt is running into billions of dollars.