In both countries, the money went to infrastructure projects under the aegis of China’s Belt and Road Initiative. Sri Lanka racked up more than $8 billion worth of debt to Chinese sovereign-backed banks at interest rates as high as 7 percent, reaching a level too high to service.
With nearly all its revenue going toward debt repayment, last year Sri Lanka resorted to signing over a 70 percent stake and a 99-year lease to the new Chinese-built port at Hambantota.
Djibouti is projected to take on public debt worth around 88 percent of the country’s overall $1.72 billion GDP, with China owning the lion’s share of it, according to a report published in March by the Center for Global Development.
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Will Djibouti Become Latest Country to Fall Into China's Debt Trap?
Djibouti lies more than 2,500 miles from Sri Lanka but the East African country faces a predicament similar to what its peer across the sea confronted last year: It has borrowed more money from China than it can pay back.