Built during the presidency of Mahinda Rajapaksa, both port and airport, built from high-interest loans from Chinese EXIM bank, are examples of fiscal profligacy.
Eighteen kilometres from Chinese owned Hambantota Port in Sri Lanka lies Mattala Rajapaksa International airport, which is unfortunately the least used airport in the world.
The Hambantota Port in Sri Lanka and Gwadar Port in restive Baluchistan in Pakistan are classical cases of white elephant projects. Both the ports are located strategically but are commercially unsustainable as there is simply not enough traffic. China has already acquired Hambantota and may acquire Gwadar too in the coming months. Fact is that there is no real income from these ports and cargo traffic is being diverted from Colombo and Karachi ports to keep them operational while Matala airport, in Sri Lanka, is sometimes used for storing paddy.
Beijing has maintained that its loans comprise 10 per cent of Sri Lanka’s overall external debt. This works out to be USD five billion out of total debt of nearly USD 51 billion excluding currency swaps, foreign currency term facility agreements, and loans given by Chinese state-owned enterprises.
In Pakistan, the Chinese EXIM Bank has loaned USD 11 billion (concessional) at an interest rate of 1.6 per cent for infrastructure projects and another USD 15.5 billion (commercial) carrying an interest rate of 5-6 per cent for power projects under the China Pakistan Economic Corridor, part of the BRI and designed to give Beijing access to the Arabian Sea and beyond.
In Pakistan, the debt burden has consistently increased due to the regular depreciation of the Pakistani Rupee at an average of six per cent per year. In Sri Lanka, the Lankan Rupee collapsed in a matter of days, increasing the cost of hard currency dramatically.
Today, the value of 1$ in Sri Lanka is equal to 300 Sri Lankan rupees.
