China will agree to $4 billion aid for Sri Lanka 'at some point' - Bloomberg News
China will agree to $4 billion aid for Sri Lanka ‘at some point’ – Bloomberg News
July 15, 2022 –
Sri Lanka is continuing negotiations with China for as much as $4 billion in aid and is confident Beijing will agree “at some point,” according to a top envoy.
Colombo is asking China for a loan of $1 billion to repay an equivalent amount of Chinese debt coming due this year, Palitha Kohona, Sri Lanka’s ambassador to China, said in an interview to Bloomberg Television Friday. It is also seeking a $1.5 billion credit line to pay for Chinese imports and activation of a $1.5 billion swap, he added.
“We are confident that at some point the Chinese system will agree to our requests because these are not unreasonable requests,” Kohona said. “We have made similar requests to other creditors. Sri Lanka needs the funding to bring stability to our financial system and we are confident that the Chinese will come to the party sooner than later.”
The bankrupt South Asian country has received about $3.8 billion in aid from neighbor India, and is negotiating for more. The cash is needed to pay for food and fuel purchases, with severe shortages seen stoking inflation to 70%, triggering violent public protests and forcing President Gotabaya Rajapaksa to flee the nation and resign.
Sri Lanka’s federal government has about $12.6 billion in outstanding bonds owed to global funds; all repayments are frozen and defaults have been recorded. It owes roughly an equivalent amount to bilateral creditors and multilateral lenders.
Some 10% of Sri Lanka’s external debt is owed to China, Kohona said. Acting President Ranil Wickremesinghe had told Bloomberg News earlier that Japan is owed roughly an equal share but the interest rates on Chinese loans are higher. Wickremesinghe is seeking a bailout from the International Monetary Fund.
India has urged the IMF to treat all of Sri Lanka’s creditors on par. China is concerned about potential delays in repayments if the agreed $1.5 billion swap is included in IMF talks, Sri Lankan authorities have said. Kohona declined to say if China will permit Sri Lanka to tap the swap but said this line won’t be included in IMF talks.
Kohona on Friday said Sri Lanka’s relationship with “close, vital neighbor” India isn’t dependent on the island’s “warm, proximate” relationship with China. He added that China-Sri Lanka relations will survive the departure of Rajapaksa, who was seen as close to Beijing.
“The president has gone, but in coming weeks we will decide on a successor,” Kohona said. “What we went through was a popular uprising, a popular expression of disenchantment. The people have expressed themselves.”
June 19, 2022
Economic crisis: China ready to negotiate Lankan debt
- Chinese awaiting Sri Lanka’s confirmed arrangement
- US Treasury officials to arrive to assist reforms programme
- IMF tax team leaves, technical team to begin discussions
Several steps are to be taken in relation to addressing Sri Lanka’s ongoing economic crisis with international assistance from this week onwards.
One of the key steps will be the commencement of discussions with China on rescheduling Sri Lanka’s debt to the same. A highly-placed source told that following China’s agreement to negotiate Chinese debt to the country, the Sri Lankan Government would be commencing the discussion in an official capacity in the next few days.
According to diplomatic sources, the Chinese are waiting for Sri Lanka to present its confirmed arrangement on debt rescheduling as the Chinese financial institutions have expressed willingness on the rescheduling process.
Prime Minister Ranil Wickremesinghe meanwhile had stated that the Government has also requested the Chinese Government to consider renegotiating the conditions of the currently idling $ 1.5 billion swap provided by China.
China accounts for 10% of Sri Lanka’s external debt and ranks third among Sri Lanka’s creditors after Japan and the Asian Development Bank (ADB).
Meanwhile, Sri Lanka’s economic crisis last week brought the envoys of the US and China together in Colombo when US Ambassador to Sri Lanka Julie Chung met with Chinese Ambassador Qi Zhenhong to discuss the situation in Sri Lanka and how best the international community could assist the country.
Ambassador Chung has left for Washington DC and is to return to the country next week (around 27 June) with officials from the US Treasury to assist Sri Lanka formulate its economic reforms programme, it is also learnt.
Prior to her departure to Washington, Chung had met with President Gotabaya Rajapaksa and Prime Minister Wickremesinghe and explained the importance of the economic reforms programme as well as the need to move forward with the political reforms programme through the proposed 21st Amendment to the Constitution. She had also informed the Sri Lankan leaders that officials from the US Treasury were ready to assist in the economic reforms programme.
It is further learnt that a team from the International Monetary Fund (IMF) that was in Colombo last week to discuss the Government’s tax structure and tax reforms had left the country during the weekend after concluding discussions with Sri Lankan officials.
The IMF’s technical team meanwhile is to arrive in the country during the weekend in order to commence discussions from tomorrow (20) as part of the programme to finalise the assistance sought by Sri Lanka to overcome the ongoing crisis.
Furthermore, the advisors – Lazard and Clifford Chance – appointed by the Government to formulate the debt restructuring plan met with Prime Minister Wickremesinghe last Thursday (16) before commencing discussions with the Finance Ministry.
Meanwhile, US Foreign Relations Committee Chairman Robert Menendez has written to Quad members congratulating the members on a successful Quad Leaders’ Summit and encouraged the Quad as it continues to develop as a functional part of the Indo-Pacific architecture, further noting that a more proactive role is required to address Sri Lanka’s political and economic crisis.
The letter then noted that today’s iteration of the Quad could lead the way in working to avoid an economic explosion in Sri Lanka that could spark a humanitarian crisis with wider, destabilising, regional impacts.
“Under the Rajapaksas, Sri Lanka has been left on the brink of financial ruin and humanitarian catastrophe. Mahinda Rajapaksa led this country straight into a Chinese debt trap and then his brother, Gotabaya Rajapaksa, failed to take the prudent economic steps necessary to avoid a default on its sovereign debt. Today, Sri Lankans of all backgrounds are rising to make clear that it is time for a change,” the letter stated.
Additionally, Menendez’s letter noted that New Delhi had taken a proactive role in providing loans and humanitarian assistance to the Sri Lankan Government to avoid a meltdown, further mentioning that Washington was preparing long-term economic support.
Article source : The Sunday Morning
