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China TimesSri Lankan president asks China to restructure debt repayments

Sri Lankan president asks China to restructure debt repayments


Sri Lankan President Rajapaksa (left) and Chinese Foreign Minister Wang Yi in Colombo.
Sri Lankan President Rajapaksa (left) and Chinese Foreign Minister Wang Yi in Colombo.

Sri Lankan President Gotabaya Rajapaksa asked China to help restructure debt repayments to help the South Asian country weather the worsening financial crisis, the office of Sri Lankan President Gotabaya Rajapaksa said in a statement on Sunday. .

Rajapaksa made the request when he met Chinese Foreign Minister Wang Yi in Colombo on Sunday.

Analysts say Sri Lanka has benefited from billions of dollars in soft loans from China, but the country is currently in the midst of a foreign exchange crisis, putting it on the brink of default.

“The President pointed out that a focus on restructuring debt repayments to address the economic crisis in the face of the COVID-19 pandemic would greatly ease the pressure on the country,” Rajapaksa’s office said in a statement.

China is Sri Lanka’s fourth largest lender, after International Financial Markets, the Asian Development Bank (ADB) and Japan. Over the past decade, China has provided Sri Lanka with more than $5 billion in loans. to build roads, ports, airports and coal-fired power plants.

But critics accuse the funds of being used for low-return white elephant projects, which China denies.

Rajapaksa also asked China to provide “favorable conditions” for its exports to Sri Lanka, the statement said. In 2020, Chinese exports to Sri Lanka totaled about $3.5 billion, but the statement gave no further details. President Rajapaksa also proposed allowing Chinese tourists to return to Sri Lanka, provided they adhere to strict COVID restrictions, including only staying in pre-approved hotels and visiting only certain tourist attractions.

Before the pandemic, China was Sri Lanka’s main source of tourists, and the country imported more goods from China than any other country.

Sri Lanka is an important part of China’s Belt and Road Initiative (BRI), a long-term plan to fund and build infrastructure to connect China with the rest of the world, but other countries, including the United States, have made the Belt and Road Known as the “debt trap” for small countries.

Sri Lanka must repay about $4.5 billion in debt this year, starting with a $500 million international sovereign bond (ISB) due Jan. 18.

China’s equivalent of $1.5 billion in yuan swaps helped the country increase its reserves to $3.1 billion at the end of December.

Sri Lankan finance ministry sources told Reuters that debt repayments to China in 2022 could fall short of the $1.54 billion promised by its ISB, about $400 million to $500 million.

Sri Lanka’s central bank has repeatedly pledged to repay all debts and said it had allocated funds for repayment for the ISB in January.

(This article is based on a Reuters report)

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