Sri Lanka (Commonwealth Union)_ Sri Lanka, grappling with the repercussions of China’s ‘debt diplomacy’, has announced the transfer of management for its $209 million Chinese-funded airport to two foreign entities, one of which is Indian. This measure aims to alleviate losses incurred by state-owned enterprises. The Mattala Rajapaksa International Airport (MRIA), financed by China EXIM Bank, has encountered various challenges since its establishment in 2013, including limited flight activity and environmental issues.
Also read: Sri Lanka visit of Swami Govind Dev Giri Maharaj
Accordingly, as per a cabinet statement issued on April 26, Shaurya Aeronautics (Pvt) Ltd from India and Airports of Regions Management Company from Russia will manage the entire operations of the airport for a 30-year duration. However, according to media reports, specific financial terms were not mentioned in the statement. In an effort to address its escalating debt and pursue economic reform, Sri Lanka is also negotiating with China EXIM Bank to readjust the loan affiliated with the airport.
Also read: Iran brightens Sri Lanka’s hydropower future
The country’s default on foreign debt in May 2022 caused an extreme financial crisis in over seventy years. While a $2.9 billion bailout from the International Monetary Fund (IMF) has offered some support, government spokesperson Bandula Gunawardana also confirmed the lease agreement. Accordingly, only a few companies showed interest in managing the operations of the airport, which is located near a wildlife sanctuary on the southern coast and presently lacks scheduled flights.
The airport, which bears the name of former President Mahinda Rajapaksa, faces several hurdles. During his administration, he promoted stronger connections with China. Some of the hurdles including concerns about its durability, owing to its position along a bird migratory route, have led several airlines to halt operations there, exacerbating its financial woes. Hence, Sri Lanka’s decision to lease the airport aligns with its strategy of privatizing state-owned enterprises to ease financial burdens.
This action also highlights Sri Lanka’s transfer of the Hambantota Port to a Chinese state-owned company in 2017 on a 99-year lease, as it grappled with repaying loans used for port construction. The project was supported by high-interest Chinese commercial loans. It cost $209 million to build, with the Exim Bank of China providing $190 million in high-interest loans. This action sparked worries about China’s expanding influence in the region and its strategy of using debt as a tool for controlling strategic assets.
