Features
Debt Trap Lessons
By DEVENDRA SAKSENA
Currently, the words ‘debt trap’ have a distinctly Chinese connotation. According to the Western press, the Chinese, as part of their geostrategy, have inveigled poor nations into borrowing huge amounts from them for fanciful infrastructural projects; almost all borrower countries are in dire economic straits, because most such projects are lying incomplete, or not yielding anticipated returns. Referring to Chinese lending as ‘debt-trap diplomacy,’ Western leaders would have us believe that China deliberately lends money to poor countries on overly challenging terms, so that loans could not be repaid, forcing borrowers to accept eco- nomic or political concessions. Western nations blame China for using ‘debt-trap diplomacy’ to promote Chinese geopolitical interests in Asia and Africa.
Exact data about Chinese lending is not in the public do- main, as China does not report its international lending, and agreements with debtor countries prohibit disclosure about Chinese loans. In many cases, Chinese companies advance loans to state-owned companies of the borrower nation, which do not figure in the borrower country’s budget. Also, China is not a member of the Paris Club or the OECD, so it is under no obligation to reveal details about the monies lent by it. But today, China is the world’s largest official creditor ~ surpassing traditional lenders such as the World Bank, the IMF, or all OECD creditor governments combined. Chinese credit is widespread.
According to Aid Data, China has financed 13,427 development projects, worth US$843 billion dollars in 165 countries, while the Harvard Business Review has estimated that the Chinese Government and State- owned companies have lent about US$1.5 trillion in direct loans, and trade credits, to more than 150 countries. For most poor countries, Chinese lending is substantial vis-à-vis their GDP. According to a study conducted by the Harvard Business Review: “For the 50 main developing country recipients, we estimate that the average stock of debt owed to China has increased from less than 1 percent of debtor country GDP in 2005 to more than 15 per cent in 2017.
A dozen of these countries owe debt of at least 20 percent of their nominal GDP to China (Djibouti, Tonga, Maldives, the Republic of the Congo, Kyrgyzstan, Cambodia, Niger, Laos, Zambia, Samoa, Vanuatu, and Mongolia).” Chinese lending gained impetus in 2013, when President Xi Jinping announced the Belt and Road Initiative (BRI), a global infrastructure development and investment strategy, under which China financed huge infrastructural projects like ports, railways, roadways, bridges, dams, and power stations in the poor developing countries of Asia and Africa ~ though BRI also includes 17 European Union countries and 22 countries in the Caribbean and South America. Repaying Chinese loans is not easy because unlike other official lenders such as the World Bank that provide finance at concessional, below-market interest rates, and longer tenures, China tends to lend at market terms, at interest rates close to those prevailing in private capital markets.
Additionally, the Chinese insist on collateral, meaning that debt repayments are secured by assets or future revenues. Western leaders cite the example of two of India’s neighbours, Sri Lanka and Pakistan, to drive home the dangers of taking loans from China. Initially, Sri Lanka got huge loans from Chinese government banks to build infrastructure like airports, sea- ports and bridges. However, revenue generated from Chinese-funded projects was insufficient to repay the Chinese loans. The largest such projects, Hambantota Harbour and Mattala Rajapaksa International Airport (MRIA), are case studies in the menace of easy Chinese loans; MRIA is lying unused while Hambantota Har- bour has been taken over by the Chinese, on a ninety-nine years lease, because Chinese debt could not be repaid. The Western press attributes Sri Lanka’s recent economic crisis, which saw day-long power cuts, soaring prices of food and other essentials, as inflation reaching twenty-five per cent, solely to problems created by Chinese loans. Sadly, for Sri Lanka, the economic meltdown metamorphosed into a political crisis. Following massive public protests, the Government had to resign. These twin crises brought Sri Lanka to the verge of sovereign default; only generous interventions by India and the IMF have kept the Sri Lankan economy afloat. A similar script is playing out in Pakistan, which had borrowed heavily from China, for its BRI project. However, Chinese ‘debt- trap diplomacy’ is not the sole reason for the economic ruin of Sri Lanka; Chinese loans accounted for only 10.8 percent of Sri Lanka’s debt burden, the rest comprising International Sovereign Bonds (36.4 per cent), Asian Development Bank (14.3 per cent), and Japan (10.9 per cent). Also, the Lankan economy was already on the verge of collapse because of the myriad unwise and populist policies of the Rajapaksa government. The failed projects, Hambantota Harbour and Mattala Rajapaksa International Airport (MRIA), were vanity projects of the Rajapaksa family, located in their backyard, at unsuitable venues; feasibility study of both projects had been conducted, not by Chinese, but by European companies. Finally, no planner could have factored in the humongous corruption, which made both projects unviable. Contrarily, China and the beneficiaries of its loans do not view Chinese loans as ‘debt-trap diplomacy’; Chinese see themselves as daring entrepreneurs, identifying economic opportunity in pro- viding loans to failing countries, and generating enormous profits from it ~ both in terms of money and resources. Many countries that have a colossal Chinese debt burden consider China as their closest friend. Acknowledging China as their prime growth catalyst, Kenyan and Comoros’ leaders hold that Africa’s only trap is ‘Poverty and Underdevelopment.’
Undoubtedly, China is the lender of last resort; unlike the World Bank and IMF, China does not insist that borrowing countries change their economic policies; it also does not check the credit history of its borrowers. Like Shylock, it could be that China is more sinned against than sinning. Since time immemorial, kings had borrowed money to secure borders, or to launch foreign military campaigns, but by the end of the twentieth century, countries were borrowing not to prosecute wars or to overcome crises but on revenue account ~ for pensions, health care, and other social services i.e., ‘revdis’ in current political parlance. The Latin American debt crisis of the 1970s and 80s, primarily affecting Brazil, Argentina and Mexico, unfolded with these countries contracting loans for development ~ mainly infrastructure projects. Slowly, borrowings, mostly from private banks, ballooned to fifty per cent of the region’s GDP. Mexico borrowed against future oil revenues; when the price of oil collapsed, so did the Mexican economy. Other Latin American countries’ economies collapsed for a diametrically opposite reason; when oil prices skyrocketed, interest rates increased, and debts became unsustainable. Ultimately, loans had to be restructured with help from the World Bank and IMF.
Currently, soaring Indian sovereign debt is causing concern to the IMF. As on 31 March 2023, the Central Government owed Rs.152.61 lakh crores amounting to 57 percent of GDP, while State Governments owed around Rs.75 lakh crore, which is 28 percent of GDP. According to Budget Estimates, the Central Government debt, which has more than doubled in the last ten years, is projected to increase to Rs.169.47 lakh crore by 31 March 2024. Worryingly, the IMF has forecast that public debt will exceed India’s GDP in the medium term, at a time when considerable investment will be required to improve resilience to climate stresses and natural disasters.
The IMF has suggested “ambitious” fiscal consolidation over the medium term, in order to curb India’s public debt. During the course of Article IV discussions with the IMF, Indian officials rightly pointed out that foreign debt was barely three percent of the public debt, so a ‘debt-trap’ situation was not in the making. Moreover, given the high Indian GDP growth rate, debt to GDP ratio had not increased significantly over the years. Yet, ill-effects of profligate spending, resulting in high indebtedness, are becoming visible. Deficit financing, used to finance the Government’s ambitious infrastructure development programmes and ‘revdis’ like Kisan Sanman Nidhi, has risen to Rs.17.86 lakh crore, or 5.9 per cent of the GDP. Also, during FY 2023-24, out of total expenditure of Rs.38.50 lakh crore, approximately Rs.11 lakh crores will go towards interest payments. Thus, a vicious cycle is created; the Government garners resources by deficit financing, which increases the interest burden, leading to more deficit financing. Foreign rating agencies hesitate to improve our ranking, despite our strong fundamentals, only because of weak financial management and high debt. Ultimately, we have to realise that the Charvaka philosophy of drinking ghee from borrowed funds, is totally inappropriate for modern economic management.
Features
Sri Lanka’s new govt.: Early promise, growing concerns
President Anura Kumara Dissanayake’s demeanour, body language, and speaking style appear to have changed noticeably in recent weeks, a visible sign of embarrassment. The most likely reason is a stark contradiction between what he once publicly criticised and analysed so forcefully, and what his government is actually doing today. His own recent speeches seem to reflect that contradiction, sometimes coming across as confused and inconsistent. This is becoming widely known, not just through social media, YouTube, and television discussions, but also through speeches on the floor of Parliament itself.
Doing exactly what the previous government did
What is now becoming clear is that instead of doing things the way the President promised, his government is simply carrying on with what the previous administration, particularly Ranil Wickremesinghe’s government, was already doing. Critically, some of the most senior positions in the state, positions that demand the most experienced and capable officers, are being filled by people who are loyal to the JVP/NPP party but lack the relevant qualifications and track record.
Such politically motivated appointments have already taken place across various government ministries, some state corporations, the Central Bank, the Treasury, and at multiple levels of the public service. There have also been forced resignations, bans on resignations, and transfers of officials.
What makes this particularly serious is that President Dissanayake has had to come to Parliament repeatedly to defend and “clean up” the reputations of officials he himself appointed. This looks, at times, like a painful and almost theatrical exercise.
The coal procurement scandal, and a laughable inquiry
The controversy around the country’s coal power supply has now clearly exposed a massive disaster: shady tenders, damage to the Norochcholai power plant, rising electricity bills due to increased diesel use to compensate, a shortage of diesel, higher diesel prices, and serious environmental damage. This is a wide and well-documented catastrophe.
Yet, when a commission was appointed to investigate, the government announced it would look into events going back to 2009, which many have called an absurd joke, clearly designed to deflect blame rather than find answers.
The Treasury scandal, 10 suspicious transactions
At the Treasury, what was initially presented as a single transaction, is alleged to involve 10 transactions, and it is plainly a case of fraud. A genuine mistake might happen once or twice. As one commentator said sarcastically, “If a mistake can happen 10 times, it must be a very talented hand.” These explanations are being treated as pure comedy.
Attempts to justify all of this have sometimes turned threatening. A speech made on May 1st by Tilvin Silva is a case in point, crude and menacing in tone.
Is the government losing its grip?
Former Minister Patali Champika has said the government is now suffering from a phobia of loss of power, meaning it is struggling to govern effectively. Other commentators have noted that the NPP/JVP may have taken on a burden too heavy to carry. Political cartoons have depicted the NPP’s crown loaded with coal, financial irregularities, and political appointments, bending under the weight.
The problem with appointing loyalists over qualified professionals
Appointing own supporters to senior positions is not itself unusual in politics. But it becomes a betrayal of public trust when those appointed lack the basic qualifications or relevant experience for the roles they are given.
A clear example is the appointment of the Treasury Secretary, someone who was visible at virtually every NPP election campaign event, but whose qualifications and exposure/experiences may not match the demands of such a critical position. Even if someone has a doctorate or professorship, the key question is whether those qualifications are relevant to the role, and whether that person has the experience/exposure to lead a team of seasoned professionals.
By contrast, even someone without formal academic credentials can succeed if they have the right skills and surround themselves with advisors with relevant exposure. The real failure is when loyalty to a political party overrides all other considerations, that is a fundamental betrayal of responsibility.
The problem is not unique to this government. In 2015, the appointment of Arjuna Mahendran as Central Bank Governor was a similar blunder. His tenure ended in scandal involving insider dealing and bond market manipulation. However, in that case, the funds involved were frozen and later confiscated by the following government, however legally questionable that process was.
The current Treasury losses, by contrast, may be unrecoverable. Critics say getting that money back would be next to impossible.
The broader damage: Demoralisation of capable officials
When loyalists are placed above competent career officials in key positions, it demoralises the best public servants. Some begin to comply in fear; others lose motivation entirely. The professional hierarchy breaks down. Junior officials start looking over their shoulders instead of doing their jobs. This collective dysfunction is ultimately what destroys governments.
Sri Lanka’s pattern: every government falls
This pattern is deeply familiar in Sri Lankan history. The SWRD Bandaranaike government, which swept to power in 1956 on a wave of popular support, had declined badly by 1959. The coalition government, which came to power reducing the opposition to eight seats, lost in 1977, and, in turn, the UNP, which came in on a landslide, in 1977, crushing the SLFP to just eight seats, suffered a similar fate by 1994.
Mahinda Rajapaksa came to power in 2005 by the narrowest of margins, in part because the LTTE manipulated the Northern vote against Ranil Wickremesinghe. But he was re-elected in 2010 on the strength of ending the war against the LTTE. Still, by 2015, he was voted out, because the benefits of winning the war were never truly delivered to ordinary people, and because large-scale corruption had taken root in the meantime. Gotabaya Rajapaksa didn’t even last long enough to see his term end.
Now, this government, too, is showing early signs of the same decline.
The ideological contradiction at the heart of the NPP
There is another challenge: though the JVP presents itself as a left-wing, Marxist-socialist party, many of those who joined the broader NPP coalition, businesspeople, academics, professionals, do not hold such ideological views. Balancing a left-leaning party with a centre-right coalition is extremely difficult. The inevitable tension between the two pulls the government in opposite directions.
The silver lining, however, is that this has produced a growing class of “floating voters”, people not permanently tied to any party, and that is actually healthy for democracy. It keeps governments accountable. Independent election commissions and civil society organisations have a major role to play in informing these voters objectively.
In more developed democracies, voters receive detailed candidate profiles and well-researched information alongside their ballot papers, including, for example, independent expert analyses of referendum questions like drug legalisation. Sri Lanka is still far from that standard. Here, many people vote the same way as their parents. In other countries, five family members might each vote differently without it being a scandal.
Three key ministries, under the President himself, all in trouble
President Dissanayake currently holds three of the most powerful portfolios himself: Defence, Digital Technology, and Finance. All three are now widely seen as performing poorly. Many commentators say the President has “failed” visibly in all three areas. The justifications offered for these failures have themselves become confused, contradictory, and, at times, just plain pitiable.
The overall picture is one of a government that looks helpless, reduced to making excuses and whining from the podium.
A cautious hope for recovery
There are still nearly three years left in this government’s term. There is time to course-correct, if they act quickly. We sincerely hope the government manages to shed this sense of helplessness and confusion, and finds a way to truly serve the country.
(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. The views and opinions expressed in this article are personal.)
Features
Cricket and the National Interest
The appointment of former minister Eran Wickremaratne to chair the Sri Lanka Cricket Transformation Committee is significant for more than the future of cricket. It signals a possible shift in the culture of governance even as it offers Sri Lankan cricket a fighting possibility to get out of the doldrums of failure. There have been glorious patches for the national cricket team since the epochal 1996 World Cup triumph. But these patches of brightness have been few and far between and virtually non-existent over the past decade. At the centre of this disaster has been the failures of governance within Sri Lanka Cricket which are not unlike the larger failures of governance within the country itself. The appointment of a new reform oriented committee therefore carries significance beyond cricket. It reflects the wider challenge facing the country which is to restore trust in public institutions for better management.
The appointment of Eran Wickremaratne brings a professional administrator with a proven track record into the cricket arena. He has several strengths that many of his immediate predecessors lacked. Before the ascent of the present government leadership to positions of power, Eran Wickremaratne was among the handful of government ministers who did not have allegations of corruption attached to their names. His reputation for financial professionalism and integrity has remained intact over many years in public life. With him in the Cricket Transformation Committee are also respected former cricketers Kumar Sangakkara, Roshan Mahanama and Sidath Wettimuny together with professionals from legal and business backgrounds. They have been tasked with introducing structural reforms and improving transparency and accountability within cricket administration.
A second reason for this appointment to be significant is that this is possibly the first occasion on which the NPP government has reached out to someone associated with the opposition to obtain assistance in an area of national importance. The commitment to bipartisanship has been a constant demand from politically non-partisan civic groups and political analysts. They have voiced the opinion that the government needs to be more inclusive in its choice of appointments to decision making authorities. The NPP government’s practice so far has largely been to limit appointments to those within the ruling party or those considered loyalists even at the cost of proven expertise. The government’s decision in this case therefore marks a potentially important departure.
National Interest
There are areas of public life where national interest should transcend party divisions and cricket, beloved of the people, is one of them. Sri Lanka cannot afford to continue treating every institution as an arena for political competition when institutions themselves are in crisis and public confidence has become fragile. It is therefore unfortunate that when the government has moved positively in the direction of drawing on expertise from outside its own ranks there should be a negative response from sections of the opposition. This is indicative of the absence of a culture of bipartisanship even on issues that concern the national interest. The SJB, of which the newly appointed cricket committee chairman was a member objected on the grounds that politicians should not hold positions in sports administration and asked him to resign from the party. There is a need to recognise the distinction between partisan political control and the temporary use of experienced administrators to carry out reform and institutional restructuring. In other countries those in politics often join academia and civil society on a temporary basis and vice versa.
More disturbing has been the insidious campaign carried out against the new cricket committee and its chairman on the grounds of religious affiliation. This is an unacceptable denial of the reality that Sri Lanka is a plural, multi ethnic and multi religious society. The interim committee reflects this diversity to a reasonable extent. The country’s long history of ethnic conflict should have taught all political actors the dangers of mobilising communal prejudice for short term political gain. Sri Lanka paid a very heavy price for decades of mistrust and division. It would be tragic if even cricket administration became another arena for communal suspicion and hostility. The present government represents an important departure from the sectarian rhetoric that was employed by previous governments. They have repeatedly pledged to protect the equal rights of all citizens and not permit discrimination or extremism in any form.
The recent international peace march in Sri Lanka led by the Venerable Bhikkhu Thich Paññākāra from Vietnam with its message of loving kindness and mindfulness to all resonated strongly with the masses of people as seen by the crowds who thronged the roadsides to obtain blessings and show respect. This message stands in contrast to the sectarian resentment manifested by those who seek to use the cricket appointments as a weapon to attack the government at the present time. The challenges before the Sri Lanka Cricket Transformation Committee parallel the larger challenges before the government in developing the national economy and respecting ethnic and religious diversity. Plugging the leaks and restoring systems will take time and effort. It cannot be done overnight and it cannot succeed without public patience and support.
New Recognition
There is also a need for realism. The appointment of Eran Wickremaratne and the new committee does not guarantee success. Reforming deeply flawed institutions is always difficult. Besides, Sri Lanka is a small country with a relatively small population compared to many other cricket playing nations. It is also a country still recovering from the economic breakdown of 2022 which pushed the majority of people into hardship and severely weakened public institutions. The country continues to face unprecedented challenges including the damage caused by Cyclone Ditwah and the wider global economic uncertainties linked to conflict in the Middle East. Under these difficult circumstances Sri Lanka has fewer resources than many larger countries to devote to both cricket and economic development.
When resources are scarce they cannot be wasted through corruption or incompetence. Drawing upon the strengths of all those who are competent for the tasks at hand regardless of party affiliation or ethnic or religious identity is necessary if improvement is to come sooner rather than later. The burden of rebuilding the country cannot rest only on the government. The crisis facing the country is too deep for any single party or government to solve alone. National recovery requires capable individuals from across society and from different sectors such as business and civil society to work together in areas where the national interest transcends party politics. There is also a responsibility on opposition political parties to support initiatives that are politically neutral and genuinely in the national interest. Not every issue needs to become a partisan battle.
Sri Lanka cricket occupies a special place in the national consciousness. At its best it once united the country and gave Sri Lankans a sense of pride and international recognition. Restoring integrity and professionalism to cricket administration can therefore become part of the larger task of national renewal. The appointment of Eran Wickremaratne and the new committee, while it does not guarantee success, is a sign that the political leadership and people of the country may be beginning to mature in their approach to governance. In recognising the need for competence, integrity and bipartisan cooperation and extending it beyond cricket into other areas of national life, Sri Lanka may find the way towards more stable and successful governance..
by Jehan Perera
Features
From Dhaka to Sri Lanka, three wheels that drive our economies
Court vacation this year came with an unexpected lesson, not from a courtroom but from the streets of Dhaka — a city that moves, quite literally, on three wheels.
Above the traffic, a modern metro line glides past concrete pillars and crowded rooftops. It is efficient, clean and frequently cited as a symbol of progress in Bangladesh. For a visitor from Sri Lanka, it inevitably brings to mind our own abandoned light rail plans — a project debated, politicised and ultimately set aside.
But Dhaka’s real story is not in the air. It is on the ground.
Beneath the elevated tracks, the streets belong to three-wheelers. Known locally as CNGs, they cluster at junctions, line the edges of markets and pour into narrow roads that larger vehicles avoid. Even with a functioning rail system, these three-wheelers remain the city’s most dependable form of everyday transport.
Within hours of arriving, their importance becomes obvious. The train may take you across the city, but the journey does not end there. The last mile — often the most complicated part — belongs entirely to the three-wheeler. It is the vehicle that gets you home, to a meeting or simply through streets that no bus route properly serves.
There is a rhythm to using them. A destination is mentioned, a price is suggested and a brief negotiation follows. Then the ride begins, edging into traffic that feels permanently compressed. Drivers move with instinct, adjusting routes and squeezing through gaps with a confidence built over years.
It is not polished. But it works.
And that is where the comparison with Sri Lanka becomes less about what we lack and more about what we already have.
Back home, the three-wheeler has long been part of daily life — so familiar that it is often discussed only in terms of its problems. There are frequent complaints about fares, refusals or the absence of meters. More recently, the industry itself has become entangled in politics — from fuel subsidies to regulatory debates, from election-time promises to periodic crackdowns.
In that process, the conversation has shifted. The three-wheeler is often treated as a problem to be managed, rather than a service to be strengthened.
Yet, seen through the experience of Dhaka, Sri Lanka’s system begins to look far more settled — and, in many ways, ahead.
There is a growing structure in place. Meters, while not perfect, are widely recognised. Ride-hailing apps have added transparency and reduced uncertainty for passengers. There are clearer expectations on both sides — driver and commuter alike. Even small details, such as designated parking areas in parts of Colombo or the increasing standard of vehicles, point to an industry slowly moving towards professionalism.
Just as importantly, there is a human element that remains intact.
In Sri Lanka, a three-wheeler ride is rarely just a transaction. Drivers talk. They offer directions, comment on the day’s news, or share local knowledge. The ride becomes part of the social fabric, not just a means of getting from one point to another.
In Dhaka, the scale of the city leaves less room for that. The interaction is quicker, more direct, shaped by urgency. The service is essential, but it is under constant pressure.
What stands out, across both countries, is that the three-wheeler is not a temporary or outdated mode of transport. It is a necessity in dense, fast-growing Asian cities — one that fills gaps no rail or bus system can fully address.
Large infrastructure projects, like light rail, are important. They bring efficiency and long-term capacity. But they cannot replace the flexibility of a three-wheeler. They cannot reach into narrow streets, respond instantly to demand or provide that crucial last-mile connection.
That is why, even in a city that has invested heavily in modern rail, Dhaka still runs on three wheels.
For Sri Lanka, the lesson is not simply about what could have been built, but about what should be better managed and valued.
The three-wheeler industry does not need to be politicised at every turn. It needs steady regulation — clear fare systems, proper licensing, safety standards — alongside encouragement and recognition. It needs to be seen as part of the solution to urban transport, not as a side issue.
Because for thousands of drivers, it is a livelihood. And for millions of passengers, it is the most immediate and reliable form of mobility.
The tuk-tuk may not feature in grand policy speeches or infrastructure blueprints. It does not run on elevated tracks or attract international attention. But on the ground, where daily life unfolds, it continues to do what larger systems often struggle to do — show up, adapt and keep moving.
And after watching Dhaka’s streets — crowded, relentless, yet functioning — that small, three-wheeled vehicle feels less like something to argue over and more like something to get right.
(The writer is an Attorney-at-Law with over a decade of experience specialising in civil law, a former Board Member of the Office of Missing Persons and a former Legal Director of the Central Cultural Fund. He holds an LLM in International Business Law)
by Sampath Perera recently in Dhaka, Bangladesh
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