Pakistan and Sri Lanka face significant economic challenges, stemming from unsustainable levels of debt and a lack of foreign reserves. Despite turning to the International Monetary Fund (IMF) for assistance, these countries have not received the support they require due to China’s reluctance to restructure their debts, write Asanga Abeyagoonasekera and Qamar Cheema.
The Chinese government had previously invested in a range of infrastructure projects under its Belt and Road Initiative; however, some of these projects are not financially self-sustaining and require substantial subsidies from the public exchequer. Both Pakistan and Sri Lanka are experiencing food insecurity, and their agricultural sectors have been severely impacted.
“Sri Lanka’s debt to GDP ratio is 119%, and Pakistan’s is at 70%, another clear sign of the unsustainable debt which has triggered the present economic crisis in both nations,” the authors note.
Furthermore, corruption is a pervasive concern in many of these projects, with due diligence and feasibility assessments often overlooked.
The military was the primary stakeholder in Pakistan’s infrastructure projects, whereas in Sri Lanka, it is the political elite from previous governments who prioritised unsustainable, mega-scale, vanity infrastructure projects.
Read more at China’s Belt and Road: Economic Crisis, Chain Reaction from Sri Lanka to Pakistan in South Asia | South Asia Journal, 15 March 2023
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