US Treasury official in Colombo for talks on economic recovery following debt trap mess

Sri Lanka debt trap treasury

US Deputy Assistant Secretary of Treasury for Asia Robert Kaproth arrived in Sri Lanka for talks with the Government on the economy.

The US Ambassador to Sri Lanka, Julie Chung tweeted saying Kaproth will meet with Government and economic leaders to discuss the way forward on economic recovery for Sri Lanka, Colombo Gazette reported.

Kaproth had talks with Power and Energy Minister Kanchana Wijesekera today on reforms of state-owned enterprises and the petroleum and power sectors.

“These changes are necessary to strengthen Sri Lanka’s economy,” Ambassador Julie Chung said.

This is Kaproth’s second visit to Sri Lanka over the past few months.

He was in Sri Lanka last June with Kelly Keiderling, Deputy Assistant Secretary of State for South and Central Asia.

During his last visit he met with a wide range of political representatives, economists, and international organizations to explore the most effective ways for the US to support Sri Lankans in need, Sri Lankans working to resolve the current economic crisis, and Sri Lankans planning for a sustainable and inclusive economy for the future.

The link between Sri Lanka’s recent economic crisis and the impact of Chinese debt-trap diplomacy has been highlighted by numerous observers. Still, it is important to stress that, like its historical predecessors, the Chinese debt-trap under analysis is a result of a bilateral relation – with responsibilities from both sides of the debt relation.

As has often happened in the past, crisis due to debt-trap relations normally becomes apparent in difficult economic times. The present crisis is no exception, but this does not allow us to disavow the unsustainability of debt as a problem on its own.

According to the IMF’s 2022 Sri Lanka country report, at the end of 2020, Sri Lanka’s bilateral debt to China was over 50 per cent of all state bilateral debt; a figure considerably above the 10 per cent of global debt normally invoked by those who dismiss the idea of a Chinese debt-trap. Crucially, it is more important to analyse the sustainability of the investment originating such debt – as US-based China expert Jonathan Hillman did in his book The Secret History of Hambantota – than to blur facts by drowning them in statistics.

The claims made by Xinhua, Global Times, and The Atlantic dismissing the existence of a Chinese debt-trap in Sri Lanka – or explaining the concept as either a product of American and Indian conspiracy theorists or as a plain myth – cannot be accepted.

One of the most striking pieces of analysis on the Chinese debt-trap begins with this telling paragraph: “American statesman John Adams, who served as president from 1797 to 1801, famously said: ‘There are two ways to conquer and enslave a country: one is by the sword; the other is by debt.’ China, choosing the second path, has embraced colonial-era practices and rapidly emerged as the world’s biggest official creditor.”

This idea – of a China that tries to conquer and enslave – could be an exaggeration for the reasons stated (i.e., that borrowing is a common and bidirectional practice). Besides, the sword and debt are not mutually exclusive – and China’s expansionist agenda across the Himalayas, on the South China Sea, or the Taiwan Strait are stark reminders of this fact.

This method of contextualising China’s debt-trap diplomacy in history seems sound, and one could look differently at the importance of it by observing that Western countries did not act in an essentially different way in the past. Still, Western countries have largely overcome some of the most dogmatic capitalist logics – which still survive in Chinese policy.

The problem, as pointed out by AidData, is that the tendency in the Chinese international investment strategy does not seem to point to the right direction.

Notwithstanding, President Xi Jinping publicly made some important statements on the need to reform the BRI, most in particular, regarding its environmental impact. Is it possible to envisage a reform-minded, progressive leader for China?

The fully-fledged imperial character of the present Chinese policy we now witness does not leave much room for reforming ambitions. A global effort of assistance to development – countering the debt-trap logic – is a necessity and should be raised to the fore by the international community.

Copyright Greekcitytimes 2024