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Sri Lanka Talks to China on Debt Rejig After IMF Meetings

Chinese officials suggested to Colombo they would prefer to refinance the bilateral debt, Media Minister Nalaka Godahewa said on Tuesday


The nation of 22 million people is battling a devastating economic crisis as tax cuts by President Gotabaya Rajapaksa drained government coffers. Photo: Reuters

 

Sri Lankan officials have started talks with China – one of its biggest lenders – on a rejig of its debt, in a further bid to help the country battle back from its worst financial crisis in years.

The news comes after Finance Minister Ali Sabry flew to Washington last week to seek a rescue package from the International Monetary Fund and the World Bank.

Chinese officials suggested to Colombo they would prefer to refinance the bilateral debt, Media Minister Nalaka Godahewa said on Tuesday.

“Now since the IMF is willing engage with Sri Lanka, the other countries are aware we have support. Already we have been promised support from the World Bank and other agencies,” Gohahewa said, adding that discussions with Beijing were at an early stage.

 

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Ali Sabry has also spoken to officials from India and other groups about financing help for the island nation, which was forced to suspend payments on portions of its $51 billion of external debt.

Sri Lanka‘s economy was hit hard by the pandemic and tax cuts by the populist government, leading to dwindling foreign currency reserves and shortages of fuel, food and medicines that have brought thousands onto the streets in sporadically violent protests.

China’s $3.5 billion of loans to Sri Lanka make it the joint-largest bilateral creditor.

President Gotabaya Rajapaksa asked China to help restructure debt repayments when he met Chinese Foreign Minister Wang Yi in January.

China’s foreign ministry and its embassy in Colombo could not immediately be reached for comment.

 

• Reuters with additional editing by Jim Pollard

 

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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