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Sri Lanka Economic Crisis: Fuel Dwindles, IMF Talks Stall
Image copyright: Getty Images [via BBC News]
The Facts
Sri Lanka's ongoing economic crisis continues to deepen, with fuel reserves almost fully depleted in the cash-strapped South Asian island nation.
On Sun., Sri Lankan finance minister Kanchana Wijesekera warned that the country's petrol reserves had dwindled to less than one day's worth under regular demand conditions.
The Spin
Anti-China narrative
Sri Lanka is in crisis, but the elephant in the room is China. The PRC is a dominant lender to developing nations, and it's Sri Lanka's biggest bilateral creditor. However, when crisis strikes and countries like Sri Lanka are unable to make good on their enormous foreign debts, China is suspiciously silent, refusing to make public the terms of its loans and negotiating tactics.
Pro-China narrative
The so-called Chinese "debt-trap diplomacy" narrative is fundamentally at odds with the reality of Sri Lanka's debt burden. In fact, according to Sri Lanka's own Department of Foreign Resources, China only owns 10% of the country's foreign public debt. Unlike the "vulture funds" that own most of its foreign bonds, China has been a strong investor and partner in Sri Lanka, helping the country to develop productive assets like the Hambantota Port.
Cynical narrative
Debt dominates the headlines, but inflation is the real threat to emerging market economies like Sri Lanka, which rely on imports of essential consumer goods like food and fuel. Inflationary pressures have hit home around the globe, but in emerging markets they're even more painful as the US dollar continues to strengthen against local currencies, putting essential goods even further out of reach for many. Unrest is the natural outcome, and it is likely to spread.