Sri Lanka’s newly elected President Gotabaya Rajapaksa inherits more than US$34.4bn worth of debt, a quarter of which are owed to China alone, reports Al Jazeera.
Colombo remains heavily burdened with foreign debt, with the Chinese, in particular, having invested billions in major infrastructure projects ranging from power stations to ports. And as Sri Lanka’s economic crisis worsened, the island was forced to hand over control of Hambantota Port in a debt-for-equity swap with Beijing in 2017.
Whilst on the campaign trail, Rajapaksa promised to halve value-added tax (VAT) and abolish other taxes to induce growth within the Sri Lankan economy. Finance ministry officials stated the cuts could lead to a loss of more than 600 billion rupees ($3.31bn) in tax revenues, which would add fuel to the fire of the debt troubles Sri Lanka faces.
In comparison with its Indian neighbour, Sri Lanka’s economic growth stood at less than half of the 6.81 percent India enjoyed, a 17-year low for the island, with the International Monetary Fund (IMF) forecasting a further slow to 2.7 percent in 2019.
See more from Al Jazeera here.