by BENJAMIN NORTON
Facing a deep economic crisis and bankruptcy, Sri Lanka was rocked by large protests this July, which led to the resignation of the government.
Numerous Western political leaders and media outlets blamed this uprising on a supposed Chinese “debt trap,” echoing a deceptive narrative that has been thoroughly debunked by mainstream academics.
In reality, the vast majority of the South Asian nation’s foreign debt is owed to the West.
Sri Lanka has a history of struggling with Western debt burdens, having gone through 16 “economic stabilization programs” with the Washington-dominated International Monetary Fund (IMF).
These structural adjustment programs clearly have not worked, given Sri Lanka’s economy has been managed by the IMF for many of the decades since it achieved independence from British colonialism in 1948.
As of 2021, a staggering 81% of Sri Lanka’s foreign debt was owned by US and European financial institutions, as well as Western allies Japan and India.
This pales in comparison to the mere 10% owed to Beijing.
According to official statistics from Sri Lanka’s Department of External Resources, as of the end of April 2021, the plurality of its foreign debt is owned by Western vulture funds and banks, which have nearly half, at 47%.
The top holders of the Sri Lankan government’s debt, in the form of international sovereign bonds (ISBs), are the following firms:
- BlackRock (US)
- Ashmore Group (Britain)
- Allianz (Germany)
- UBS (Switzerland)
- HSBC (Britain)
- JPMorgan Chase (US)
- Prudential (US)
The Asian Development Bank and World Bank, which are thoroughly dominated by the United States, own 13% and 9% of Sri Lanka’s foreign debt, respectively.
Washington’s hegemony over the World Bank is well known, and the US government is the only World Bank Group shareholder with veto power.
Less known is that the Asian Development Bank (ADB) is, too, largely a vehicle of US soft power. Neoconservative DC-based think tank the Center for Strategic and International Studies (CSIS), which is funded by Western governments, affectionately described the ADB as a “strategic asset for the United States,” and a crucial challenger to the much newer, Chinese-led Asian Infrastructure Investment Bank.
“The United States, through its membership in the ADB and with its Indo-Pacific Strategy, seeks to compete with China as a security and economic partner of choice in the region,” boasted CSIS.
Another country that has significant influence over the ADB is Japan, which similarly owns 10% of Sri Lanka’s foreign debt.
An additional 2% of Sri Lanka’s foreign debt was owed to India as of April 2021, although that number has steadily increased since. In early 2022, India was in fact the top lender to Sri Lanka, with New Delhi disbursing 550% more credit than Beijing between January and April.
Both Japan and India are key Western allies, and members of Washington’s anti-China military alliance in the region, the Quad.
Together, these Western firms and their allies Japan and India own 81% of Sri Lanka’s foreign debt – more than three-quarters of its international obligations.
By contrast, China owns just one-tenth of Sri Lanka’s foreign debt.
The overwhelming Western role in indebting Sri Lanka is made evident by a graph published by the country’s Department of External Resources, showing the foreign commitments by currency:
As of the end of 2019, less than 5% of Sri Lanka’s foreign debt was denominated in China’s currency the yuan (CNY). On the other hand, nearly two-thirds, 64.6%, was owed in US dollars, along with an additional 14.4% in IMF special drawing rights (SDR) and more than 10% in the Japanese yen (JPY).
Western media reporting on the economic crisis in Sri Lanka, however, ignores these facts, giving the strong, and deeply misleading, impression that the chaos is in large part because of Beijing.
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