China dodges request on Sri Lanka’s debt relief

Earlier, Sri Lankan President Ranil Wickremesinghe urged China on Thursday to restructure its debt…reports Asian Lite News

China, Colombo’s largest bilateral lender dodged the request for debt relief and said that the ball is in Sri Lanka’s court.

A spokesman for the Chinese embassy said that the ball is in Sri Lanka’s court, not China’s, reported Sei Lankan publication Daily Mirror.

“We sent proposals to the Finance Ministry. But, there was no response from them. Also, Sri Lanka insisted that it should complete the agreement with the International Monetary Fund (IMF) first. The ball is in Sri Lanka’s court,” the spokesman said.

The spokesman told Daily Mirror China communicated to the Sri Lankan Finance Ministry three months ago about its readiness to discuss how to address the debt issue with the Chinese banks.

He said China encouraged its banks to discuss it. The Chinese position was also communicated during the telephone conversation between Chinese Premier Li Keqiang and then Sri Lankan Prime Minister Mahinda Rajapaksa.

Earlier, Sri Lankan President Ranil Wickremesinghe urged China on Thursday to restructure its debt.

“We have informed the Chinese Government of the need to restructure the debt and the need for all the creditors to ‘sing from the same hymn sheet’,” Wickremesinghe told Nikkei Asia in an interview.

The appeal to China has emerged as a formidable challenge to Wickremesinghe, who is leading the country’s financial team as it attempts to rebuild an economy starved of foreign reserves and mired in misery, reported a Sri Lankan publication, The Morning.

Sri Lanka’s total bilateral debt was estimated at USD 6.2 billion at the end of 2020 by the IMF, reported Daily Mirror.

An International Monetary Fund (IMF) statement on the eve of its visit highlighted, albeit obliquely, that the China factor is set to shape Sri Lanka’s economic fortunes.

On the prospects of giving Sri Lanka a multibillion-dollar bailout, the fund said, “Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the Extended Fund Facility programme would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored.”

The Washington-based fund’s team will be in Colombo until the end of this month and called on Wickremesinghe on Thursday to discuss the current situation of the economic crisis the nation is grappling with at present, reported The Morning.

During the meeting with President Wickremesinghe, the IMF delegates decided to hold further discussions with Central Bank of Sri Lanka (CBSL) officials on technical issues, the President’s Media Division (PMD) said.

Meanwhile, Japan and China hold the largest shares. India has provided around USD 4 billion to help keep Sri Lanka’s economy afloat, mainly through credit lines and swaps this year. Sri Lanka also has USD 14 billion of international sovereign bond debt.

India emerged as the first responder under Prime Minister Narendra Modi’s Neighbourhood First policy when Sri Lanka was left alone by its so-called benefactors for funding support.

India has responded with urgency to the government of Sri Lanka’s request for assistance in overcoming hardships and will enhance economic linkages between the two countries be it through infrastructure connectivity and renewable energy. (ANI)

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