In 2017, when Sri Lanka was unable to repay the Chinese debt, it handed over the Hambantota port and 1500-acre land around it to China over 99 years lease despite locals protests and opposition’s concerns over sovereignty and national security. China and Sri Lanka signed a concessional loan agreement of USD 1.1 billion to develop the Hambantota port giving its 70% stake (revised from 85%) to a Chinese firm (China Merchants Ports Holdings CMPH) and 30% to Sri Lanka Ports Authority (SLPA). China marked it a milestone achieved as a part of the BRI.
To ally the local’s concerns, the government assured national security will remain intact. The government further explained the deal would help them to manage the country’s foreign debt taken by the previous government while experts opined that economic rationale for the port is not quite convincing. Even India, Japan and the United States have raised concerns over China’s naval expansion that ha threatened the regional security. Besides that, some reports accused government for using Chinese financing to cater its political interests. Notwithstanding, it is opined that the port deal wasn’t meant to repay Chinese debt obtained for port construction but it was a strategic deal to strengthen the foreign reserves. It would be unfair to blame China for Sri Lanka’s debt burden as Chinese loans, in 2019, accounted for around 10% of Sri Lanka’s total foreign debt.