Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The US will lend $553mn for the development of a container terminal in Sri Lanka operated by Indian tycoon Gautam Adani as Washington works to counter China’s influence in the country.
Adani Ports and Special Economic Zone holds a 51 per cent stake in Colombo’s west container terminal, which it is developing with Sri Lankan conglomerate John Keells Holdings and the Sri Lanka Ports Authority.
The US International Development Finance Corporation (DFC) held a ceremony on Wednesday in Colombo to publicise the commitment.
The deal is an example of how countries such as the US and India are responding to a debt crisis in Sri Lanka, which last year became the first Asia-Pacific country in more than two decades to default on its foreign debts. China is the largest bilateral creditor to Sri Lanka, which has over the past decade become a major participant in Beijing’s Belt and Road Initiative.
China has financed nearly 300 projects on the island since 2000, according to the AidData lab at William & Mary college, providing aid and credit totalling more than $20bn. In 2017, the island also handed control of its southern Hambantota port to China on a 99-year lease.
But the US and India, who want to counter China’s influence in the Asia Pacific region, have been trying to catch up. The agency’s investment in Sri Lanka has climbed from $20mn four years ago to “almost $1 billion”, the US DFC posted on social media site X. Sri Lanka has become “DFC’s second-largest market in the entire Indo-Pacific region”, the country’s US ambassador Julie Chung posted on X.
DFC chief executive Scott Nathan met with top officials in Sri Lanka this week, including President Ranil Wickremesinghe, to discuss investment opportunities. The lender’s website says it works to advance “US foreign policy” as well global development.
Nathan said that the private sector loan to the Adani-led terminal consortium “will expand [the terminal’s] shipping capacity, creating greater prosperity for Sri Lanka — without adding to sovereign debt — while at the same time strengthening the position of our allies across the region.”
The deal “reflects growing strategic trust between India and the United States to co-operate to offer alternatives to China’s Belt and Road Initiative”, said Constantino Xavier, a fellow at the Centre for Social and Economic Progress think-tank in New Delhi.
It is “part of a larger Indian regional connectivity strategy that ropes in the private sector and strategic partners like the US, Japan and European Union”.
Western and Indian critics have argued that excessive borrowing from China exacerbated Sri Lanka’s crisis. Sri Lanka is currently in talks with creditors, including India and China, to restructure its overseas debt, which totals around $40bn. Last month it announced a preliminary restructuring deal with the Export-Import Bank of China, but is yet to agree terms with other creditors such as India, Japan and France.
Anushka Wijesinha, an economist in Colombo, said that investment at the port was “long overdue . . . to increase capacity and remain competitive”.
The US’s financial backing also comes as the billionaire Adani works to push past allegations of stock market manipulation and accounting fraud made by New York-based short seller Hindenburg Research in January. Adani strongly refutes the accusations.
The financing is “a reaffirmation by the international community of our vision, our capabilities and our governance,” Karan Adani, Adani Ports chief executive, said in a speech in Colombo on Wednesday. In a statement, Adani Ports described the loan as “a ringing endorsement of the Adani Group”.
The Adani group, which aligns itself closely with Indian prime minister Narendra Modi’s development objectives, has long denied accusations that pressure from New Delhi has helped them secure projects in Sri Lanka.
