Sri Lanka in crisis asks China to restructure its debt repayment

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New Delhi: Sri Lankan President Gotabaya Rajapaksa met Chinese Foreign Minister Wang Yi on Sunday and called on the Asian giant to restructure debt repayment to help the island nation deal with the deepening financial crisis, according to reports.

Wang was in Sri Lanka for a two-day visit, to mark the 65th anniversary of diplomatic relations between the two countries.

China has loaned Sri Lanka over $ 5 billion for various infrastructure projects including roads, ports and an airport over the past decade. There are, however, reports that the money has been used for low performance programs.

“The president stressed that it would be a great relief for the country if attention could be paid to the restructuring of debt repayments as a solution to the economic crisis that has arisen in the face of the Covid-19 pandemic,” said Rajapaksa’s office. as said in a statement, according to a BBC report.

The statement also said China was asked to extend “concessional” terms for its exports to Sri Lanka, which amounted to around $ 3.5 billion last year.

Sri Lanka relies on imports for many of its basic necessities and buys more goods from China than from any other country.

Rajapaksa also said Chinese tourists could return to Sri Lanka if they adhere to strict Covid-19 regulations.

China was Sri Lanka’s main source of tourists before the pandemic.

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Sri Lanka’s economic crisis and Chinese debt

Sri Lanka has been hit by a severe debt and currency crisis for about a year now, and the loss of tourism has only made matters worse.

The crisis has led to soaring prices and severe shortages. Long queues can be seen in front of grocery stores across the country.

The country is heavily in debt and China is its fourth largest lender, after international financial markets, the Asian Development Bank and Japan, according to the BBC report.

China has given Sri Lanka billions of dollars in soft loans, and the latter is almost on the verge of default due to its currency crisis, according to the report.

Last year, a 1.5 billion yuan swap helped Sri Lanka increase its reserves to $ 3.1 billion at the end of December, Reuters news agency reported.

At around $ 400 to $ 500 million, debt repayment to China in 2022 could be less than international sovereign bond commitments by $ 1.54 billion, the report said, citing a source at the Sri Lanka Finance Ministry. lankan.

Sri Lanka is due to repay around $ 4.5 billion this year to other lenders, starting with a $ 500 million ISB that matures on January 18.

The country has repeatedly declared that it will meet all of its obligations. Sri Lanka’s central bank said last week that funds for the January ISB had already been allocated.

Sri Lanka is part of China’s Belt and Road Initiative, under which it plans and finances the infrastructure that connects the country to the rest of the world.

The project mainly involves smaller, poorer nations, and the United States and some other countries have called it a “debt trap.”

China has consistently rejected the charges.


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