• On Wednesday, official data revealed that Sri Lanka's annual inflation rate jumped to 70.2% in August as the country faces its worst-ever economic crisis, shrinking 8.4% in the quarter through June from a year ago.
  • The National Consumer Price Index (NCPI), which represents broader retail price inflation, was affected by an 84.6% hike in food prices and a 57.1% raise in non-food items.
  • Meanwhile, the more closely observed and leading national indicator Colombo Consumer Price Index (CCPI) climbed 64.3%. Inflation is expected to narrow from September but only reach single digits in the second half of 2023.
  • Sri Lanka has been struggling to pay for essential imports, including food, fuel, fertilizer, and medicine amid a severe foreign currency shortage caused by economic mismanagement and the COVID pandemic.
  • Several nations have reportedly vowed to support Sri Lanka's debt restructuring efforts, including Japan and France, as the country seeks creditor assurances to access $2.9B from the International Monetary Fund (IMF).
  • On Tuesday, India announced it had begun talks with Sri Lanka on restructuring its debt and offering long-term investments. New Delhi has already provided almost $4B in financial aid, offered a $55M credit line for fertilizers, and put off nearly $1.2B of import payments.


Anti-China narrative

Sri Lanka's economic crisis is a product of Chinese foreign policy, specifically its practice of "debt-trap diplomacy." China doesn't provide funds and build infrastructure in developing nations to help them become more viable. Rather, they are trapping vulnerable countries in unsustainable amounts of debt, knowing that they'll fail their financial obligations, allowing China to control them and acquire private and public assets.

Pro-China narrative

While Western observers have lauded India's help to Sri Lanka, they've criticized China for providing the same loans and economic assistance. The so-called "debt trap diplomacy" is a narrative that the West has used to defame and smear China. China has worked with Sri Lanka to help meet its financing needs and improve its ability for sustainable development. Loans and aid to Sri Lanka shouldn't be treated differently based on which country they come from.

Establishment split



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