Sri Lanka asks China to ‘restructure’ its debt repayments

ISTANBUL

Sri Lanka has asked China to restructure its debt repayments, besides seeking a concessional trade credit scheme on imports from Beijing.

This came during the meeting between Sri Lankan President Gotabaya Rajapaksa and Chinese Foreign Minister Wang Yi in Colombo on Sunday.

“The president pointed out that it would be a great relief to the country if the attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the COVID-19 pandemic,” a statement by the Sri Lankan president’s office said.

A Chinese Foreign Ministry statement did not mention the issue, but said Rajapaksa “appreciated the important contributions made by Chinese enterprises to Sri Lanka's economic revitalization and infrastructure construction.”

Sri Lanka is part of China’s multi-trillion-dollar Belt and Road Initiative.

Restructuring of loans essentially means lenders and borrowers, who are under financial duress, renegotiate the terms and conditions of the loans to avoid default.

The two countries also vowed to “further strengthening the 65 years of diplomatic relations.”

“China would always support Sri Lanka as a close friend,” Wang told the Sri Lankan president.

Wang arrived in Sri Lanka on Saturday from the Maldives. He was on a multinational trip to Africa where he visited Eritrea, Kenya, and Comoros before moving back home after visiting Male and Colombo.

According to the Sri Lankan statement, Rajapaksa asked Wang: “If a concessional trade credit scheme could be initiated for imports from China, it would enable the industries to operate smoothly.”

He also asked China to enable Chinese tourists to travel to Sri Lanka to boost its tourism.

Einar Tangen, a Beijing-based analyst, told Anadolu Agency that many developing nations including Sri Lanka have non-performing projects which are financed by China, “that they cannot pay for.”

“They are focused on essential goods, vaccines, food medicines as their economies falter. The downturn in tourism and supply chain issues that have impacted major exports like textiles have dried up hard currency sources,” Tangen said.

The island nation is undergoing a severe economic crisis as its foreign reserves have slipped down to around $1.6 billion.

“China is wary as this will not be the last time they are asked to help. Beijing will have to decide if they will take a case by case or blanket approach,” he added.