China says doing ‘utmost’ to help debt-ridden Sri Lanka but silent on specifics

International

pti-PTI

Beijing, Apr 12: China on Tuesday reiterated that it is doing its “utmost” to provide assistance to debt-ridden Sri Lanka, even as Beijing maintained a steady silence on Colombo’s request for debt rescheduling as well as extending the promised USD 2.5 billion assistance.

Saddled with a huge forex crisis, Sri Lanka on Tuesday suspended servicing external public debt pending the completion of its discussions with the International Monetary Fund (IMF) and the preparation of a comprehensive debt restructuring program covering the obligations.

The policy shall 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 Sri Lanka Finance Ministry said.

Asked about the reported request of Sri Lanka to China for monetary help to tide over the present crisis, Chinese Foreign Ministry spokesman Zhao Lijian on Tuesday reiterated his ministry’s previous remarks that China has been doing its utmost for Sri Lanka and will continue to do so.

“Since the establishment of diplomatic ties between China and Sri Lanka, the two countries have lent mutual support and understanding to each other,” Zhao told a media briefing here. “China has been doing its utmost to provide assistance for the socio-economic development of SL and we will continue to do so going forward,” he said, reiterating what his ministry said on March 9.

Last month China acceded to Pakistan’s request to rollover USD 4.2 billion debt repayment to provide a major relief for its all-weather ally, which is reeling under major economic crisis. Though there was no official announcement, the then Pakistan Foreign Shah Mahmood Qureshi said this after talks with his Chinese counterpart Wang Yi during his visit to China on March 30.

Beijing is yet to react to last December’s request by Sri Lankan President Gotabaya Rajapaksa to reschedule debt owed by his country to China. China is also silent on last month’s announcement by Chinese Ambassador Qi Zhenhong that China is considering a USD 2.5 billion credit facility to Sri Lanka.

Qi’s announcement came close on the heels of an announcement by India to extend USD 1 billion line of credit to Sri Lanka as part of its financial assistance to help the country deal with the economic crisis.

India had extended a USD 500 million line of credit to Sri Lanka in February to help it purchase petroleum products. “Sri Lanka has asked for USD 2.5 billion that includes a USD 1.5 billion buyer’s credit. It (the request) is under consideration,” Qi told reporters here.

“Both the countries now have to discuss how the loan and buyer’s credit will be used,” he added. Qi, however, did not give any direct answer to questions on whether China would be restructuring the debt owed by Sri Lanka.

In his meeting with Chinese Foreign Minister Wang Yi in December in Colombo, Rajapaksa raised Sri Lanka’s deepening forex crisis and spiralling external debt and sought Beijing’s assistance. Rajapaksa pointed out that it would be a great relief to Sri Lanka if attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of COVID-19 pandemic.

It is estimated that Sri Lanka owes debt payments to China in the region of USD 1.5 to 2 billion this year. Overall China’s loans and investments in Sri Lanka was estimated to be more than USD eight billion in the last few years.

China’s takeover of the Hambantota port on 99 years’ lease for USD 1.2 billion debt swap drew international concerns over Beijing acquiring strategic assets far away from home by providing heavy loans and investment to smaller nations.

The Hambantota port together with Colombo port city project, where China is building a new city with reclaimed land in the sea, were viewed with concern, especially in India as Beijing solidified its footing in Sri Lanka, strategically located in the Indian Ocean. PTI