Sri Lanka leases Chinese-built Mattala Rajapaksa Airport to Indian Russian firms amid debt woes

As Sri Lanka is trying to recover from the implications of China’s ‘debt diplomacy’, the country’s cabinet has announced the transfer of management for its $209 million Chinese-funded airport to two foreign companies, including one Indian. This move has been taken in a bid to mitigate losses incurred by state-owned enterprises.

Mattala Rajapaksa International Airport (MRIA), constructed with financing from China EXIM Bank, has faced challenges since its inauguration in 2013, including minimal flights and environmental concerns.
A joint venture between an Indian and a Russian firm have been awarded the management of Sri Lanka’s Mattala Rajapaksa International Airport in Hambantota, the Government spokesman said on April 26.

The USD 209 million facility was once dubbed the “world’s emptiest airport” due to a lack of flights.

According to a cabinet statement released on Friday (Apr 26), Shaurya Aeronautics (Pvt) Ltd of India and Airports of Regions Management Company of Russia will oversee the airport’s operations for a period of 30 years.

However, specific financial details were not disclosed in the statement, media reports said.

In a bid to address its mounting debt and to bring about economic reform, Sri Lanka is also in talks with China EXIM Bank to restructure the loan associated with the airport. Sri Lanka’s default on foreign debt in May 2022 brought the country to its most severe financial crisis in over seven decades.

A $2.9 billion bailout from the International Monetary Fund (IMF) has provided some stability.

Bandula Gunawardana, government spokesperson, confirmed the lease agreement. Only a handful of four companies expressed interest in managing the airport, situated near a wildlife sanctuary on the southern coast and currently devoid of scheduled flights.

Named after former President Mahinda Rajapaksa, who fostered closer ties with China during his tenure, the airport is facing challenges. Amid concerns about the airport’s viability, compounded by its location on a bird migratory route, several airlines have ceased operations there, contributing to its financial struggles.

Sri Lanka’s decision to lease the airport follows a pattern of privatising state-owned enterprises to alleviate financial burdens.

Hambantota Port
The move also draws attention to Sri Lanka’s handing over of the Hambantota Port to a Chinese state-owned company in 2017 on a 99-year lease as it struggled to repay the loans taken to build the port. This move raised concerns about China’s growing influence in the region and its ability to use debt as a means of exerting control over strategic assets.

(With inputs from agencies)