Sri Lanka’s external debt – 81% held by the West and its allies

A lot of hype and propaganda has deceived the world and Sri Lankans into believing that China has trapped Sri Lanka in debt. For every misfortune that Sri Lanka suffers, the credit goes to China. It has been the buzzword of Colombo cocktail circles wanting to dictate the way the whole of Sri Lanka thinks.

Sri Lanka’s economic woes have naturally been blamed on China. The sad truth is that Sri Lanka’s foreign debt is owed to the West, not China. Holding 81% of Sri Lanka’s foreign debt, the West and its allies are sucking Sri Lanka away. It is not China but the West and its allies that have trapped Sri Lanka in debt. More than $50 billion of Sri Lanka’s $54 billion debt is not held by China but by the West and its allies.

IMF genius

Eighty-one percent of Sri Lanka’s debt is held by US and European financial institutions as well as their Asian allies, Japan and India.

Sri Lanka has gone to the IMF 16 times and had to deal with structural adjustments, but have structural adjustments done Sri Lanka any good?

Against 81% of Sri Lanka’s debt held by West and his allies, Sri Lanka’s debt to China is only 10%.

Advocata claims that China holds $3.5 billion of the $54 billion debt that Sri Lanka owes foreigners.

This means that more than $50 billion of Sri Lanka’s debt is not owed to China.

47% of this 81% foreign debt is held by Western funds and banks.

Topping the list of international sovereign bondholders are:

* Allianz (Germany)
* Amundi Asset Management

* Ashmore Group (Great Britain)
* BlackRock – in 2009 acquired Barclays Global Investors (BGI)

* Fidelity Investments – US Retirement System
* Hamilton Reserve Bank – holds $250 million of 5.875% Sri Lanka bonds due July 25, 2022. They have filed a lawsuit in New York.

* HBK Capital Management
* HSBC (Great Britain)

* JP Morgan Chase – US pension system
* Lord Abbett – American pension system

*Morgan Stanley Investment Management
* Neuberger Berman – American pension system

* Pacific Investment Management
* PIMCO – American pension system

* Prudential (United States)
* St. Kitts and Nevis has accused Sri Lanka of excluding some bondholders from the restructuring, blaming officials responsible for the restructuring.

* Rowe Price Associates Inc – US pension system
*UBS (Switzerland)

Sri Lanka’s default is causing American pensioners to suffer massive losses of up to 80% of the value of their initial investment, this is the argument put forward by the Hamilton Reserve Bank which has sued Sri Lanka in court. Despite failing to repay the $78 million Chinese loan due in July, China’s Exim bank did not sue Sri Lanka.

$12.5 billion of international sovereign bonds were issued by Sri Lanka on the advice of CBSL Governor Indraji Coomaraswamy. This was taken long before Covid-19 affected Sri Lanka in March 2020. Sri Lanka’s current head of CBSL and then Finance Minister Sabry decided to default, saying Sri Lanka was “bankrupt” in April 2022.

The above three have a lot to answer. Taking sovereign bonds and boldly defaulting clearly hadn’t made the point of how Sri Lanka was going to repay or the repercussions of saying Sri Lanka wouldn’t repay. Didn’t it occur to them that their grand speech would get the nation into legal trouble?

Sri Lanka has hired financial and legal advisers Lazard and Clifford Chance to renegotiate with creditors which include 30 asset managers and bilateral loans from Japan, India and China.

How much does Sri Lanka pay Lazard and Clifford Chance for their advice?

Lazard and Clifford Chance will face White and Case LLC as legal counsel and Rothschild and Co as financial advisers to the more than 30 asset managers who hold Sri Lanka’s international bonds.

The AfDB holds 13% of Sri Lanka’s external debt.

The World Bank holds 9% of Sri Lanka’s external debt.

The AfDB and the World Bank are dominated by the United States with veto power.

Japan holds 10% of Sri Lanka’s external debt while Japan exerts influence over the AfDB.

Two percent of Sri Lanka’s external debt is owed to India, although with current grants from India the percentage would have increased.

The West and its alliances are not only ceding monetary control over Sri Lanka, but its formation of the Quad and anti-China military alliance puts Sri Lanka on a tightrope with enormous pressure using the reality of the debt of 81%.

When they give – they give with undisclosed and disclosed expectations.

So, the West and its allies are using this 81% to exert enormous pressure on Sri Lanka.

In 2015, the United States and India installed a puppet regime in power.

At the end of 2019, less than 5% of Sri Lanka’s external debt was held by China. 64.6% were in dollars, 14.4% in IMF SDRs and 10% in Japanese yen.

Given that China is well used to the lies and distortions of Western media and can afford to ignore them, can Sri Lanka do the same?

Was this 81% foreign debt a disease of the neoliberal policies and associated ills that Sri Lanka had to endure, forcing Sri Lanka into the trap of the West?

Was the sudden decision to default on debt mostly without repaying any debt owed to China part of a larger plan to push Sri Lanka deeper into debt with Western allies?

If IMF bailouts failed 16 times earlier, how likely is the 17th IMF bailout to succeed?

How did the West and its allies get away with spreading false propaganda. Where were the so-called Sri Lankan economists to set the record straight? Surely they had all the numbers and should have told the general public the real picture?

It is not only the “economic experts” who are guilty of spreading lies and distortions taking the position of Western Allies and anti-China, but the local and international media are also guilty.

“Wall Street Journal ‘China Loans Slammed as Sri Lankan Debt Crisis Deepens.’

Voice of America: “China’s global image under pressure as Sri Lanka faces debt trap” accused China of following debt trap diplomacy to weaken countries to make them dependent on China. Associated Press ABC News, Al Arabiya, Al Jazeera also carried the anti-Chinese tempo.

India Today, The Print, Wion, New Indian Express, Business Standard have also echoed anti-China rhetoric blaming Sri Lanka’s economic situation on China.

Many think tanks across the United States also published the same version as British and European news agencies.

Sri Lanka has no debt to China.

China has not seized Sri Lanka’s assets and globally there are nearly 20 cases where China has helped countries out of economic crisis instead of seizing assets. China has not taken Sri Lanka to court either. The different aspect of loans from the West and China is how they look at how a project can contribute in the future.

In fact, China has written off over $3.4 billion and restructured $15 billion of African debt. At no time has China exerted pressure on indebted countries.

China has shown through its 30-year development plan how to turn a nation in poverty into a nation challenging Western hegemony. Over the past 40 years, China has lifted 800 million people out of poverty while 37.2 million Americans (11.4%) live in poverty.

If Sri Lanka should seek advice, it’s China on how to restructure state-owned enterprises, as China has shown how to transform a poverty-stricken China into what it is today. . Sri Lanka must seriously avoid reverting to failed models of neoliberal privatization.

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