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China reiterates that its aid to Sri Lanka never attached with political strings

China’s assistance to Sri Lanka never comes with any political strings attached, and China never seeks any selfish political gains from its investment and financing in Sri Lanka, Foreign Ministry Spokesperson Zhao Lijian reiterated recently.

China isn’t Sri Lanka’s biggest creditor. The largest share (36 percent) of Sri Lanka’s external debt is to private-sector bondholders, many of them U.S.- and Europe-based institutional investors, official sources revealed.

China is only the fourth-largest creditor, after the Asian Development Bank and Japan.

But many commentators worry more about China because of geopolitics. They fear that China may turn debt into influence and power.

Other countries have expressed concerns that China will use its debt, as well as the possibility for debt relief and currency swaps, to claim a strategic foothold in the region

Foreign Ministry Spokesperson Zhao noted that China fully relates to the difficulties and challenges faced by Sri Lanka and supports relevant financial institutions in discussing with Sri Lanka and properly resolving them.

We have all along provided support to Sri Lanka’s socioeconomic development as long as our ability permits,” Zhao was quoted as saying by Xinhua.

This year marks the 65th Anniversary of China-Sri Lanka diplomatic relations, and the 70th Anniversary of the Rubber-Rice Pact, Zhao said, noting that it is of great significance in building on past achievements and working for fresh progress.

Sri Lanka owed Chinese lenders $7.4 billion – nearly a fifth of its public external debt – by the end of last year, calculations by the China Africa Research Initiative (CARI) published on Wednesday showed, an estimate higher than many others.

The figure was above the “often-quoted 10 to 15 percent figures,” the study said, adding a “significant portion” of the country’s debt to China had been recorded under lending to state-owned enterprises rather than central government.

Export-Import Bank of China (EximBank) and China Development Bank are the two largest Chinese lenders, accounting for $4.3 billion and $3 billion respectively, according to the data collected by CARI at the Johns Hopkins University School of Advanced International Studies.

The island nation kicked off talks with bilateral creditors in September after securing a staff level agreement of $2.9 billion with the International Monetary Fund.

But financing will not flow until the fund’s board approves the deal, a step that requires financial assurances from bilateral lenders.

The latest talks initially expected earlier this month were postponed, casting doubt over how fast the debt rework can progress.

The island nation’s total external debt is $37.6 billion, according to the report. Adding central bank foreign currency debt, including a $1.6 billion currency swap with China, public external debt rises to $40.6 billion, of which 22% is from Chinese creditors.

CARI’s total debt numbers differ from the $46.6 billion tally published by the government in September as it excludes local hard-currency debt and loans to some state-owned enterprises.

The CARI study also identified six different loans to the deep water port in Hambantota from EximBank between 2007 and 2013 for around $1.3 billion.

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