What Sri Lanka can learn from China’s debt management

China and Sri Lanka, then Ceylon, began their economic modernization a year apart, in the aftermath of World War 2. At the time, Ceylon boasted strong foreign currency reserves and reasonable social development indicators for a decolonizing country, while China was severely weakened by civil war, Japanese occupation and an economic embargo. In the 70 years since, Sri Lanka and China have converged as close partners in trade, investment and cultural exchange, while diverging in development outcomes. China has been able to maintain social stability, emerge as the world’s factory, and is now one of the world’s largest creditors.

Sri Lanka, however, was mired in two insurrections and a 30 year civil war, has remained dependent on export of low value-added goods What Sri Lanka can learn from China’s debt management and services, and relies on foreign borrowings to finance its twin deficits.

By Shiran Illanperuma

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