Beijing: China, one of the top lenders to Sri Lanka, said it was willing to negotiate a medium- and long-term debt disposal plan with Colombo in a “friendly manner” to enable the crisis-struck island nation to achieve debt sustainability.
Reacting to reports quoting Governor of the Central Bank of Sri Lanka, Nandalal Weerasinghe, that the debt-struck nation expects China to support its debt restructuring efforts, and help it begin repaying its obligations, Chinese Foreign Ministry spokesperson Wang Wenbin said Beijing has already committed to waiving the principle and the interest of the debt for two years.
“As a bilateral official creditor, the Export-Import Bank of China has clearly stated in the financing support document issued to the Ministry of Finance of Sri Lanka that it will extend the maturity of Sri Lanka’s debts due in 2022 and 2023,” Wang said.
He added that during this period, Colombo would not have to repay the principal and interest of the loan, helping the cash-strapped country ease short-term debt repayment pressure.
“Eximbank is willing to use this window period to negotiate a medium- and long-term debt disposal plan with Sri Lanka in a friendly manner, and do its best to promote” the country achieve debt sustainability, Wang said.
Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves, sparking a major political and humanitarian crisis in the island nation.
The Washington-based International Monetary Fund had made Sri Lanka’s debt restructuring a prerequisite for granting the $ 2.9 billion bailout.
In January, China gave debt-ridden Sri Lanka the financing assurances required by the IMF to unlock the bailout package, days after India strongly backed the island nation’s efforts to secure the loan from the global lender to recover from its worst-ever economic crisis.
The International Monetary Fund’s Executive Board approved a 48-month extended arrangement under its Extended Fund Facility (EFF) with an amount of SDR 2.286 billion (about $ 3 billion) to Sri Lanka following financing assurances from the creditors.
Sri Lanka, which drew its first tranche of the $ 3 billion bailout programme, has already met an instalment to pay back an Indian line of credit which the island nation obtained early last year just before announcing the debt default.
The IMF bailout, the 17th in Sri Lanka’s history, was approved following prolonged discussions over Colombo’s unsustainable debt.
PTI