brahmdeep alune
Over the years, China has become a lender to many third world countries that can affect a nation’s sovereignty on its own terms. Neo-colonialism is a complex concept in international politics, where the poor countries are caught in the economic clutches of the superpowers and this also affects their political sovereignty. India’s neighboring country Sri Lanka is currently badly caught in the debt trap of China. Due to this the entire economic system of the country has collapsed.
There has been an unprecedented increase in the inflation rate. The prices of everyday things are skyrocketing. The plight in Sri Lanka has increased so much that the country is on the verge of bankruptcy. In such a situation, the government may stop getting revenue. People can stop paying taxes. The government is appealing to the people that if they have foreign currency, they should deposit it instead of Sri Lankan currency. The apprehension has also increased that people may stop accepting the country’s currency.
The value of Sri Lanka’s currency has reached its lowest level. International rating agency Fitch has also downgraded Sri Lanka. President Gotabaya Rajapaksa has declared an economic emergency in the country. The main reason for Sri Lanka’s deteriorating situation is China’s high interest rate, which is causing Sri Lanka to take more debt for not paying its installments on time. In such a situation, public welfare schemes have stopped in the country. Subsidies to the general public have been stopped and efforts are being made to preserve foreign exchange reserves.
In fact, China is rapidly increasing economic and military activities to become a global power. His One Belt One Road project costing more than US$ 3 trillion is called ‘Project of the Century’. Under this project infrastructure is to be developed in many countries of the world. Through this, China wants to increase its dominance in Central Asia, South-East Asia and the Middle East. There are many countries involved with this project, but most of the money is coming from China-backed development banks and state-run banks there.
China’s policy is to join small countries with them and trap them in debt trap. In the past two decades, China has either invested or lent about $850 billion to about thirteen and a half thousand projects in one hundred and sixty-five countries. A large part of this money is related to the ambitious Belt and Road project of Chinese President Xi Jinping. Under this project, China is building new global trade routes. Countries trapped in China’s debt trap include countries like Djibouti, Kyrgyzstan, Laos, Maldives, Mongolia, Montenegro, Pakistan and Tajikistan.
In a bid to transform Sri Lanka through the One Belt One Road project, the Sri Lankan leadership blindly accepted Chinese offers to make Sri Lanka a hub of international trade on the lines of Dubai and Singapore. Last year, the Parliament of Sri Lanka passed the Port City Economic Commission Bill. This bill gives special exemption to the areas built with the financial help of China. Neither the opposition parties were talked about nor tried to establish a consensus in the country about these laws made in the name of developing special economic zones and attracting foreign investment.
One hundred and sixteen hectares of land has been given on lease to a Chinese company for ninety-nine years in the name of Port City Colombo. Earlier, Sri Lanka had handed over the Hambantota port to China due to non-payment of debt. Not only this, the government of Sri Lanka wants to change the economic model of its country. It has become entangled in China’s business model of organic farming by ignoring the interests of small farmers. The Rajapaksa government suddenly banned chemical fertilizers and pesticides. This has affected the farming community in a big way and the agricultural economy has collapsed.
Now Sri Lanka wants to get out of the debt trap of China. For this, it has also tried to get financial assistance from the International Monetary Fund (IMF). But the IMF ignored his demand because the current government of the country did not intend to implement the economic reform agenda according to the agency.
This year the government and the private sector of Sri Lanka have to pay off the debt of about $ 7 billion. Whereas according to the central bank of Sri Lanka, the country has reached the verge of running out of foreign exchange. In this, China has a debt of more than five billion dollars on Sri Lanka. Sri Lanka just got out of civil war a few years back and could be devastated if it doesn’t come out of debt. Banks will be closed, if the anger of the people increases, then there can be horrific violence.
In the midst of all this, it is seen that no country is dependent on the IMF and the World Bank in the event of bankruptcy after the rise of China. But China works on the policy of taking strategic advantage in the name of economic aid. China has been distributing loans freely to many poor and middle-income countries. That is part of his strategy.
China spends almost twice as much money on its international development projects as the US and many other major countries of the world. With this amount being given in the name of development, it is difficult to initially predict the extent to which their progress will be affected by the loan. Its rules are so tough that in the event of non-payment of the loan, the borrowing countries have to hand over the entire project to that country. In many cases contracts are completely opaque.
Laos is one of the poorest countries in Southeast Asia. In Laos, China is working on a railway project under the One Belt One Road. Its cost is close to 6.5 billion dollars, which is half of the GDP of Laos. Laos is not in a position to repay this debt and it has been forced to accept the demands of China.
Third world countries were looking at the new international economy with the hope that it would stop colonial exploitation of underdeveloped countries by developed countries and would lead to a just and equitable distribution of world income and resources. China has challenged the new international economy through its ‘bread and butter policy’. China’s state-run banks are giving more loans to people in their country than to other countries.
After Sri Lanka, the danger of getting trapped in other neighboring countries of India like Maldives, Myanmar, Bhutan and Nepal is increasing. The pressure of Chinese debt in these countries could eventually exacerbate the democratic crisis. Obviously, China’s debt strategy is going to increase strategic problems for India.
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