China says its initiative to build ports and other infrastructure across Sri Lanka with Chinese loans, will boost trade and it is ready to help the island nation to ease foreign debt
But in a cautionary tale for borrowers, Sri Lanka’s multi billion-dollar debt to Beijing threatens to hinder efforts to resolve a financial crisis so severe that the Indian Ocean nation cannot import food or fuel
Chinese Foreign Ministry Spokesman said China is ready to play a constructive role in easing the island nation’s debt burden.
Responding to a media query whether China be willing to be treated on par with other Sri Lankan creditors given the country’s inability to repay debts, Zhao said that China understands the difficulties and challenges Sri Lanka currently faces and is ready to play a constructive role in Sri Lanka’s sustainable economic and social development.
“We feel deeply for the difficulties and challenges Sri Lanka faces and are ready to play a constructive role in the steady economic and social development of Sri Lanka.”
The spokesman further said, as for Sri Lanka’s China-related debts, China supports relevant financial institutions in discussing with Sri Lanka and properly resolving them.
We also stand ready to work with relevant countries and financial institutions to continue to play a constructive role in easing Sri Lanka’s debt burden and realising sustainable development.”
The Spokesman said China believes that Sri Lanka will work on its own to get through the difficulties and to protect the legitimate rights and interests of foreign investment and financial partners.
“At the same time, we hope and believe that Sri Lanka will work together with the parties concerned and boost its own effort to get through the difficulties, and protect the legitimate rights and interests of foreign investment and financing partners and maintain the stability and credibility of its own investment and financing environment,” Zhao said.
Sri Lanka owes $7 billion this year to Chinese banks and other lenders but suspended payment April 13 while it talks with the IMF. The government also owes $25 billion, or about half its total, to private sector bond investors.
A restructuring agreement with China or Japan would be a “positive signal” for a recovery in a written response to questions, the Chinese foreign ministry said Beijing is ready to “play a positive role in easing Sri Lanka’s debt burden” but gave no indication whether the amount owed might be reduced.
“China is willing to support relevant financial institutions to negotiate with Sri Lanka,” the ministry said.
In April, then-opposition leader Ranil Wickremesinghe told broadcaster Republic TV that China offered a $1 billion loan instead of reducing Sri Lanka’s debt. That would allow the government to make payments, but the total owed would rise
The spokesman Zhao further said, as for Sri Lanka’s China-related debts, China supports relevant financial institutions in discussing with Sri Lanka and properly resolving them. “We also stand ready to work with relevant countries and financial institutions to continue to play a constructive role in easing Sri Lanka’s debt burden and realising sustainable development.”
The Spokesman said China believes that Sri Lanka will work on its own to get through the difficulties and to protect the legitimate rights and interests of foreign investment and financial partners.
“At the same time, we hope and believe that Sri Lanka will work together with the parties concerned and boost its own effort to get through the difficulties, and protect the legitimate rights and interests of foreign investment and financing partners and maintain the stability and credibility of its own investment and financing environment,” Zhao said.
