Sri Lanka’s president Ranil Wickremesinghe said that the country has started debt restructuring talks with its largest bilateral creditor – China, a step crucial for it to qualify for a $2.9 billion rescue package from the International Monetary Fund (IMF) to rescue the island nation from an acute economic crisis. Mr. Wickremesinghe in a series of tweets said that the debt restructuring negotiations with China will resume after the 20th National Congress of the Chinese Communist Party beginning the 16th of October.
So far, China has not said clearly anything about restructuring the loans it gave to Sri Lanka despite repeated appeals by Colombo to Beijing since Foreign Minister Wang Yi’s visit to Colombo in January 2022. Experts say, China has so far preferred the route of refinancing its loans or deferring the repayment dates for countries in debt to Chinese banks rather than restructuring the loans and settling for a loss-making “haircut.” It is essential for all creditors to come to the table for ‘transparent and fair’ debt restructuring discussions as this is one of the requisites for an International Monetary Fund (IMF) bail-out agreement to Colombo.
Mr. Wickremesinghe, recently returned from his visits to the UK, Japan, and the Philippines where he met with a number of world leaders and addressed the Asian Development Bank Board of Governors meeting in Manilla attended by Finance Ministers from 68 countries. ADB has indicated that they are prepared to extend a loan of $500m, his tweet said. Sri Lanka welcomes Japan’s willingness to take a leading role in restructuring the island nation’s debt, he further said in his tweet. India has already expressed its support to Sri Lanka.