1.9 Title: ​DFAT Country Information Report: Sri Lanka Source: Australia. Department of Foreign Affairs and Trade. Date of Document: 23 December 2021 URL: https://www.dfat.gov.au/sites/default/files/country-information-report-sri-lanka.pdf Accessed Date: 16 May 2022

1.8 Title: The impact of the COVID-19 pandemic, including on detention conditions, access to justice and socio-economic conditions in major cities (2019–May 2021) Code: LKA200596.E Source: Immigration and Refugee Board of Canada Date of Document: 7 May 2021 URL: https://irb-cisr.gc.ca/en/country-information/rir/Pages/index.aspx?doc=458345 Accessed Date: 26 May 2021

1.7 Title: ​Présentation de Sri Lanka Source: France. Ministère de l'Europe et des Affaires étrangères. Date of Document: 18 February 2021 URL: https://www.diplomatie.gouv.fr/fr/dossiers-pays/sri-lanka/presentation-du-sri-lanka/ Accessed Date: 16 May 2022

1.5 Title: ​Sri Lanka Development Update: Economic and Poverty Impact of COVID-19 Source: The World Bank Date of Document: June 2021 URL: https://thedocs.worldbank.org/en/doc/15b8de0edd4f39cc7a82b7aff8430576-0310062021/original/SriLanka-DevUpd-Apr9.pdf Accessed Date: 16 May 2022

1.4 Title: ​Sri Lanka. BTI 2022 Country Report. Source: Bertelsmann Stiftung Date of Document: February 2022 URL: https://bti-project.org/en/reports/country-report/LKA Accessed Date: 16 May 2022

1.2 Title: ​Sri Lanka. The World Factbook. Source: United States. Central Intelligence Agency Date of Document: 10 May 2022

2.4 Title: ​Sri Lanka. World Report 2022: Events of 2021. Source: Human Rights Watch Date of Document: January 2022 URL: https://www.hrw.org/world-report/2022/country-chapters/sri-lanka Accessed Date: 16 May 2022

2.3 Title: ​Sri Lanka. Freedom in the World 2022. Source: Freedom House Date of Document: 2022 URL: https://freedomhouse.org/country/sri-lanka/freedom-world/2022 Accessed Date: 16 May 2022

Steep payments on international sovereign bonds, which comprised nearly 40 percent of the country’s external debt, put Sirisena’s government in dire fiscal straits almost immediately. When Sirisena took office, Sri Lanka owed more to Japan, the World Bank, and the Asian Development Bank than to China. Of the $4.5 billion in debt service Sri Lanka would pay in 2017, only 5 percent was because of Hambantota. The Central Bank governors under both Rajapaksa and Sirisena do not agree on much, but they both told us that Hambantota, and Chinese finance in general, was not the source of the country’s financial distress.

In 2012, Sri Lanka borrowed another $757 million from China Eximbank, this time at a reduced, post-financial-crisis interest rate of 2 percent. Rajapaksa took the liberty of naming the port after himself.

This was in 2007, six years before Xi Jinping introduced the Belt and Road Initiative. Sri Lanka was still in the last, and bloodiest, phase of its long civil war, and the world was on the verge of a financial crisis. The details are important: China Eximbank offered a $307 million, 15-year commercial loan with a four-year grace period, offering Sri Lanka a choice between a 6.3 percent fixed interest rate or one that would rise or fall depending on LIBOR, a floating rate. Colombo chose the former, conscious that global interest rates were trending higher during the negotiations and hoping to lock in what it thought would be favorable terms. Phase I of the port project was completed on schedule within three years.

The prime example of this is the Sri Lankan port of Hambantota. As the story goes, Beijing pushed Sri Lanka into borrowing money from Chinese banks to pay for the project, which had no prospect of commercial success. Onerous terms and feeble revenues eventually pushed Sri Lanka into default, at which point Beijing demanded the port as collateral, forcing the Sri Lankan government to surrender control to a Chinese firm.

There was also never a default. Colombo arranged a bailout from the International Monetary Fund, and decided to raise much-needed dollars by leasing out the underperforming Hambantota Port to an experienced company—just as the Canadians had recommended. There was not an open tender, and the only two bids came from China Merchants and China Harbor; Sri Lanka chose China Merchants, making it the majority shareholder with a 99-year lease, and used the $1.12 billion cash infusion to bolster its foreign reserves, not to pay off China Eximbank.

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