BEIJING (Reuters) – China reiterated on Tuesday that it was doing “everything possible” to provide assistance to debt-ridden Sri Lanka, even as Beijing maintained a constant silence on Colombo’s demand for debt rescheduling as well than on the extension of the promised assistance of $2.5 billion.
Grappled with a massive foreign exchange crisis, Sri Lanka suspended external public debt service on Tuesday pending the completion of its discussions with the International Monetary Fund (IMF) and the preparation of a comprehensive restructuring program for the debt covering bonds.
The policy will be in effect for all international bonds, all bilateral loans excluding swaps between the Central Bank and a foreign central bank, all loans with commercial banks and institutional lenders, the Finance Ministry said. Sri Lanka.
Asked about Sri Lanka’s request for monetary aid from China to overcome the current crisis, Chinese Foreign Ministry spokesman Zhao Lijian on Tuesday reiterated his ministry’s earlier remarks that China has done everything its possible for Sri Lanka and will continue to do so. “Since the establishment of diplomatic relations between China and Sri Lanka, the two countries have supported and understood each other,” Zhao said at a press briefing here.
“China has done its utmost to provide assistance for the socio-economic development of SL and we will continue to do so in the future,” he said, reiterating what his ministry said on March 9.
China last month granted Pakistan’s request to defer repayment of the $4.2 billion debt to bring major relief to its all-time ally, which is reeling from an economic crisis. major. Although there was no official announcement, Pakistani foreigner Shah Mahmood Qureshi said this after talks with his Chinese counterpart Wang Yi during his visit to China on March 30.
Beijing has yet to react to Sri Lankan President Gotabaya Rajapaksa’s request last December to reschedule his country’s debt to China. China is also silent on Chinese Ambassador Qi Zhenhong’s announcement last month that China was considering a $2.5 billion credit facility to Sri Lanka.
Qi’s announcement came shortly after India announced to extend a $1 billion line of credit to Sri Lanka as part of its financial assistance to help the country weather the economic crisis. .
India extended a $500 million line of credit to Sri Lanka in February to help purchase petroleum products. “Sri Lanka has requested $2.5 billion, including a buyer’s credit of $1.5 billion. This request is under review. The two countries are now to discuss how the loan and buyer’s credit will be used,” Qi told reporters here.
However, Qi gave no direct answers to questions about whether China would restructure the debt owed by Sri Lanka. When meeting with Chinese Foreign Minister Wang Yi in December in Colombo, Rajapaksa referred to Sri Lanka’s deepening currency crisis and soaring external debt and asked for Beijing’s help.
Rajapaksa stressed that it would be a great relief for Sri Lanka if attention could be given to restructuring debt repayments as a solution to the economic crisis that arose in the face of the COVID-19 pandemic.
Sri Lanka is estimated to owe debt payments to China in the region of $1.5 billion to $2 billion this year. Overall, China’s loans and investments in Sri Lanka have been estimated at more than $8 billion over the past few years.
China’s takeover of the port of Hambantota on a 99-year lease for a $1.2 billion debt swap has sparked international concern over Beijing’s acquisition of strategic assets away from home in granting large loans and investments to small nations.
The Port of Hambantota as well as the proposed port city of Colombo, where China is building a new city with land reclaimed from the sea, have been viewed with concern, particularly in India as Beijing consolidates its position in Sri Lanka, strategically located in the Indian Ocean.
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