China has expressed its full support for Sri Lanka’s foreign debt restructuring process after conducting a thorough review.
The Secretary of the Ministry of Finance, Mahinda Siriwardena, is scheduled to visit Beijing soon to discuss the matter further, as reported by the Daily Mirror.
As Sri Lanka’s largest bilateral creditor, China’s Exim Bank is owed $2.83 billion by the country, as of the end of 2020. Calculations by the China Africa Research Initiative indicate that Sri Lanka’s total debt to China through bilateral credit agreements is projected to reach $7.4 billion by the end of 2022. The Chinese government has authorized EXIM Bank to engage with Sri Lankan authorities regarding debt restructuring.
Japan, India, and France, being other major creditors, have announced a joint platform to facilitate discussions among bilateral creditors to coordinate debt restructuring efforts in Sri Lanka.
During his recent visit to China, Foreign Minister Ali Sabri held talks with EXIM Bank Chairman Wu Fulin, during which Chinese authorities reportedly provided an effective guarantee for debt restructuring, as per the Daily Mirror’s sources. China will also monitor the ongoing discussions between Japan, India, and France regarding Sri Lanka’s debt restructuring process.
The Sri Lankan government has assured that all creditors will be treated equally. The Daily Mirror, citing insider information, reports that the finance ministry secretary will soon travel to China to make arrangements for debt restructuring. It is expected that an acceptable solution will be reached, and China will enter into a bilateral agreement with Sri Lanka for debt restructuring.
Furthermore, Sri Lanka’s parliament has approved the government’s Domestic Debt Restructuring (DDR) program on Saturday, adding to the measures being taken to address the country’s debt challenges.
