China’s foreign minister Wang Yi was in Sri Lanka on sunday seeking to advance China’s ambitious project the world has ever seen of belt and road initiative as Sri Lanka looks to Beijing for help as it tries to rescue itself from a foreign currency and debt crisis.
Wang Yi arrived in Sri Lanka on Saturday from the Maldives after a trip to africa that sow him visit Eritera, Kenya and Comoros. It has been a long standing policy for Chinese officials to first visit Africa in their frst foreign trip at the begining of the new year.
The first visit of the year by Chinese officials to Africa not Europe or US shows that China puts much efforts and prioritizes its relations with Africa unlike many heads of state who have even never bothered to visit Africa.
Wang Yi’s visit to Sri Lanka comes at time when the country is facing the worst economic crises in decades with foreign reserves down to around 1.6 billion dollars, barely enough for a few weeks of imports.
Sri Lanka also has a foreign debt obligations exceeding 7 billion dollars in 2022- including repayment of bounds worth 5 million dollars in january and 1 billion dollars in july.
As it stands, China is only country capable of helping Sri Lanka since current Chinese loans to Sri Lanka totalled around 3.38 billion dollars not including loans to state-owned businesses.
Sri Lanka is technicially bankrupt since its foreign reserves are in red and this has left households facing severe shortages as people wait in lines to buy essential goods like milk powder, cooking gas and kerosene.
Recently prices have shot up and Sri Lanka’s central bank says the inflation rate rose to 12.1% by the end of December from 9.9% in novermber and flood inflation increased to over 22% in the same period.
Due to a currency shortage, importers are unble to clear their cargo containing essentials and manufacturers are not able to buy raw materials from overseas.
Rating agency, Fitch Ratings downgrade in December of Sri Lanka has also worsened the situation as it made the country lose its borrowing power.
Wang Yi’s visit to Sri Lanka comes after Sri Lanka central bank added a currency swap in Chinese yuan worth 1.5 billion to the reserves.
Both India and China are competing for influence in the region eventhough India is limited by what it can offer, this means Wang Yi’s visit to Sri Lanka is of great significance in the regional.
Sri Lanka is an important link in China’s belt and road initaitive and has increased investments and loans in the country since 2009 when the civil war ended.
India also considers Sri Lanka critical part of its territory influence and has been trying all it could with the help of U.S to reduce Chinese influence in the country and the region but so far, they have failed as China’s influence will likely continue to grow as country look to it for post covid-19 recovery.