China agrees to restructure Sri Lanka’s debt
2023.01.24 04:40
China agrees to restructure Sri Lanka’s debt
By Ray Johnson
Budrigannews.com – According to a letter reviewed by Reuters, the Export-Import Bank of China has stated that it will support Sri Lanka’s efforts to obtain a $2.9 billion loan from the International Monetary Fund and has offered the country a debt moratorium of two years.
In a letter to the International Monetary Fund (IMF) earlier this month, India stated that it would support Sri Lanka with financing and debt relief. However, the island nation also requires the support of China to reach a final agreement with the global lender.
China and India, rivals in the region, are Sri Lanka’s largest bilateral lenders. With 22 million people, Sri Lanka is experiencing its worst economic crisis in seven decades.
Based on Sri Lanka’s request, the Export-Import Bank of China stated in the letter that it would grant an immediate extension to the debt service due in 2022 and 2023.
According to a March 2019 IMF report, China EXIM bank had loaned Sri Lanka $2.83 billion by the end of 2020, or 3.5% of the island’s debt.
The letter stated that “…you will not be required to repay the principal and interest due on the bank’s loans during the above-mentioned period.”
“In the meantime, we would like to accelerate the negotiation process with your side regarding the treatment of medium and long-term debt during this window period.”
The China Africa Research Initiative found that by the end of last year, Sri Lanka owed Chinese lenders $7.4 billion, or nearly a fifth of its public external debt.
The letter stated that the bank would support Sri Lanka’s application for the IMF Extended Fund Facility (EFF) to alleviate the liquidity problem.
P. Nandalal Weerasinghe, the head of the central bank in Sri Lanka, stated on Tuesday that the nation hoped for assurances from China and Japan, another significant bilateral lender, that the debt restructuring would be completed within six months.
