As of the end of December last year, the Sri Lankan government's total external debt reached a staggering $37.3 billion, immediately sparking widespread attention.
Sri Lanka, located in the Indian Ocean, has established close economic cooperation with China despite its distance. Therefore, many people are concerned that Sri Lanka may default on its debts to China. According to data disclosed by relevant institutions, Sri Lanka owes China nearly $4.5 billion in external debt.
The concerns of the people are not unfounded.
Not long ago, faced with enormous debt pressure, Sri Lanka stated that it was unable to repay, leading to speculation about whether Sri Lanka's debt would become a muddled account.
In fact, as early as the second quarter of 2022, the Sri Lankan economy had fallen into distress. Soaring inflation and steep rises in food prices directly affected the living standards of the local people.
Errors in judgment by the government's top echelons, coupled with failed expectations of economic transformation, exacerbated the economic plight.
Sri Lanka was not always so impoverished. However, the debt default has led to the current situation of deferred debt repayment.
As a country located on the Indian subcontinent, Sri Lanka has long relied on plantation economies.
Although the government has attempted to develop an industrial system, the results have been minimal, and currently, it can only rely on primary garment manufacturing and agricultural processing.
Sri Lanka began implementing economic liberalization policies relatively early in the South Asian region, gradually attracting foreign investment and constructing a market economy system since 1978.
However, with the outbreak of the 2008 U.S. subprime mortgage crisis, the global economy suffered severe damage, and Sri Lanka was not spared. This led to the outbreak of domestic conflicts and economic stagnation.
Since 2021, Sri Lanka's economic crisis has worsened, facing multiple problems such as currency devaluation, reduced grain production, and shortages of essential goods.
Citizens have taken to the streets in protest, expressing dissatisfaction with the government.
After the outbreak of the Russia-Ukraine conflict in early 2022, international energy prices soared, making life even more difficult for Sri Lanka.
Faced with massive debt, Sri Lanka announced the suspension of external debt repayment and ultimately declared bankruptcy on July 6 of the same year.
Sri Lanka's debt problem has attracted widespread attention.
Although China has close cooperation with Sri Lanka, Sri Lanka now owes not only China but also other countries such as Japan, the United States, and Europe. Debt default will have a significant impact on Sri Lanka's destiny.
China has been actively helping Sri Lanka out of its predicament, providing assistance and coordinating with the International Monetary Fund for debt restructuring.
The two sides reached an agreement, with China leasing Sri Lanka's commercial port for long-term commercial activities such as commodity transportation.
China's assistance has played a positive role in alleviating Sri Lanka's economic difficulties, benefiting not only the people of Sri Lanka but also safeguarding the common interests of all creditors.
At the same time, this is also beneficial for China to solve the "blockade" issue from other countries, achieving a win-win or even multi-win situation.
To emerge from the debt crisis, Sri Lanka must cooperate with all parties, gradually solve the debt problem through rational economic policies and international cooperation, restore economic development, and achieve long-term stability.
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