After India's backing, China too offers support to Lanka for IMF bailout

Chinese loans amounted to 20 per cent of the total debt owed and 43 per cent of the bilateral loans

Press Trust of India Colombo
Sri Lanka

Representative Image (Photo: ANI)

China has given debt-ridden Sri Lanka the financing assurances required by the IMF to unlock a USD 2.9 billion bailout package for the country, 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 Sunday Times newspaper reported that China's Exim Bank delivered a letter on Saturday granting Sri Lanka a two-year moratorium on repayment and agreeing with the International Monetary Fund's extended fund facility (EFF).

The report was confirmed by Sri Lankan officials who did not want to be named.

The Chinese response came close on the heels of India stepping in first to issue the necessary assurances last week.

India's ministry of finance last week issued a letter to the IMF to confirm its support to Sri Lanka on the issue of debt restructuring, ahead of the visit by the external affairs minister S Jaishankar to Colombo which concluded on Friday.

Jaishankar during his visit also announced that India has given the required assurances to Sri Lanka for the bailout package.

Also Read

IMF may make formal announcement on SL's bailout package tomorrow: Reports

Sri Lanka president raises IMF loan hopes, budget aims to bolster revenue

US to participate in Sri Lanka's debt restructuring to help revive economy

Sri Lanka resumes bailout discussions with IMF, finance ministry says

IMF agrees to give Ghana $3 bn debt bailout to restore financial stability

China no longer comfortable with status quo on Taiwan: Antony Blinken

Israelis press on with protests against Netanyahu's new government

China refuses to reveal number of death count for December 2022: Report

Sri Lanka earned $900 million through rubber exports in 2022: Official

China's realty magnate Hui Ka Yan loses 93% wealth amid slowdown in sector

Sri Lankan officials said that China had agreed to a short-term suspension of what Sri Lanka owed and expects Sri Lankan creditors to get together to work out the medium and long-term commitments.

The IMF in September last year approved Sri Lanka a 2.9 billion dollar bailout package over 4 years pending Sri Lanka's ability to restructure its debt with creditors -- both bilateral and sovereign bond holders.

By the end of June 2022, Sri Lanka owed nearly USD 40 billion to bilateral, multilateral and commercial loans, according to the figures released by the Treasury.

Chinese loans amounted to 20 per cent of the total debt owed and 43 per cent of the bilateral loans.

Sri Lanka in April declared its first-ever debt default in its history as the economic crisis triggered by forex shortages sparked public protests.

Months-long street protests led to the ouster of the then president Gotabaya Rajapaksa in mid-July. Rajapaksa had started the IMF negotiations after rejecting to tap the global lender for support.

With assurances from creditors, the 2.9 billion dollar facility could get the IMF board approval in March, officials said.

Sri Lanka has introduced painful economic measures such as tax hikes and utility rate hikes. Trade unions and opposition groups have organised protests against such measures.

The IMF bailout has been put on a halt as Sri Lanka pursues talks with creditors to meet the global lender's condition for the facility to help it get through its worst economic crisis since independence in 1948.

Earlier, Sri Lanka completed its debt restructuring talks with Japan.

The IMF facility would enable the island nation to obtain bridging finance from markets and other lending institutions such as the ADB and the World Bank.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Jan 22 2023 | 2:08 PM IST

Explore News