Sri Lanka paid a Chinese company $6.8 million despite rejecting its shipment of organic fertiliser as substandard, officials said Saturday, even though Colombo is in the throes of a foreign exchange crisis.
The state-run People’s Bank of Sri Lanka said it paid Qingdao Seawin Biotech Group $6.87 million in connection with an out-of-court settlement over the shipment.
Fertiliser is one of the items in short supply in Sri Lanka, but authorities said in October tests had shown the shipment was contaminated and banned it from landing anywhere on the island.
China retaliated by blacklisting the bank and threatening international legal action against Colombo.
Beijing is a key development partner of Colombo and has given billions of dollars in loans, raising concern that Sri Lanka may be heading for a Chinese debt trap, though both nations have rejected such worries.
The settlement comes ahead of a visit to the island by Chinese Foreign Minister Wang Yi later Saturday.
The Chinese representative is making a two-day visit for talks with President Gotabaya Rajapaksa and other leaders, and to mark the 65th anniversary of diplomatic ties between the two sides.
Sri Lanka originally ordered the Chinese organic fertiliser as part of Rajapaksa’s drive to become the world’s first 100 percent organic farming nation.
Following widespread protests by farmers who said abandoning agrochemicals would critically hit yields, the government in October lifted a ban on chemical fertiliser imposed in May last year.