US concerned over unsustainable debt burdens to Sri Lanka by China

The US has expressed concern over the "unsustainable debt-burden" on Sri Lanka due to non- concessional loans from China.

China is investing billions of dollars in infrastructure development in Sri Lanka.

Sri Lanka is struggling to repay Chinese money and recently signed an agreement to give a state-run Chinese firm a stake in the strategic Hambantota port as a way of paying down some of that debt.

Under the USD 1.1 billion deal, the Chinese company will develop the deep-sea port of Hambantota.

"China is providing non-concessional loans that promote unsustainable debt burdens, which I think are increasingly now of concern to the Sri Lankan people in the government," Alice Wells, Acting Assistant Secretary of State for South and Central Asian Affairs told a Congressional subcommittee yesterday during a hearing on South Asia.

The US has notably reduced its assistance to Sri Lanka by 92 per cent.

"In Sri Lanka, we're the largest grant provider of assistance. China is providing non-concessional loans that promote unsustainable debt burdens, which I think are increasingly now of concern to the Sri Lankan people in the government. But what we bring to our relationship are multiple tools," she said.

While there has been a significant percentage reduction in US aid to Sri Lanka, Wells said the US is using its tools to reinforce a message of reform, and to bring Sri Lanka into a space where they too will institutionalise the principles of the Indo-Pacific -- freedom of navigation, transparency, non- militarisation humanitarian assistance and disaster relief at its core.