In a recent report in India’s English Daily - Economic Times it is highlighted that “India's southern neighbour Sri Lanka may plunge further into the Chinese debt trap with Colombo yet again turning to Beijing for fresh loans, which will come during the final quarter of 2018.”

The Indian Economic Times report points out that the Central Bank of Sri Lanka is working with its Chinese counterpart, People's Bank of China, to issue the equivalent of US $250 million worth of yuan-denominated Panda bonds, and “China is already the largest lender to the island nation”.

“Sri Lanka retains fondness for Chinese loans -- rather than international sovereign bonds -- despite high rate of interest” the report notes adding that Sri Lanka recently secured a US $1 billion syndicated loan from China Development Bank.

“But the US $1.25 billion in loans will push Sri Lanka closer to China. Lankan foreign reserves are now at US $ 8.5 billion and inadequate, according to analysts who study Lankan economy” the report highlights adding that Colombo’s accumulated foreign debt is estimated at US $55 billion.

 The report goes into explain that between 2019 and 2023, Colombo has to garner US $ 17 billion for foreign loans maturing and debt servicing.

“Its lenders include the China Development Bank, the governments of Japan and India as well as multilateral institutions like the World Bank and Asian Development Bank. Indian and Japanese loans have a much lower interest rate” the report notes adding that China charges an interest rate of 6.3% for its loans to Sri Lanka, while the interest rates on soft loans from the World Bank and the Asian Development Bank (ADB) are only 0.25–3%.

“Interest rates of India’s Line of Credit to the neighbouring countries are as low as 1%, or even less in some cases” India’s Economic Times noted in report adding that the Sri Lanka's debt is 77% of its GDP.

“This is higher than the debt-to-GDP ratio of India, Pakistan, Malaysia and Thailand” the Economic Times report goes into elaborate without taking in to the fact that Sri Lanka is only less than US $ 84 billion economy whilst India is a US $ 2.2 trillion economy.