ECONOMYNEXT – The International Monetary Fund (IMF) has told Sri Lanka to handle Chinese mega-projects like those under the Belt and Road Initiative (BRI) with care.
“To reap the benefits of China’s Belt and Road Initiative, Sri Lanka should carefully manage large-scale capital projects,” the IMF said in the latest assessment by its executive board of its program with Sri Lanka.
It noted that Sri Lanka has undertaken important investment projects under the BRI, including the Hambantota Port on the south coast and Colombo Port City, a big reclamation work next to the Colombo harbour.
Hambantota port, built by Chinese state firms with Chinese loans, was leased to Chinese global port operator China Merchant Port Holdings Limited (CM Port) after it failed to attract enough ships and Sri Lanka found it difficult to repay the loans.
Another Chinese-built and funded project, Mattala airport, close to Hambantota met with a similar fate and remains empty, adding to the island’s debt burden, the Sri Lankan government has said.
“While these projects can foster Sri Lanka’s growth through greater regional trade and financial integration, they should be selected and managed carefully given the country’s high public debt and social development needs,” the IMF said.
“Staff stressed with the authorities the importance of sound and transparent project selection, consistency with fiscal targets and mitigation of fiscal risks, including by avoiding special tax treatments or gaps in financial and regulatory frameworks.”
Both the Hambantota Port lease and Colombo Port City project have drawn criticism for tax breaks given to the Chinese.
(COLOMBO, June 26, 2018)