Tuesday, January 31, 2023

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China calls for joint efforts of foreign donors to ease SL’s debt burden

China hopes relevant countries and international financial institutions will work with China to play a positive role in helping Sri Lanka overcome the current difficulties.

Chinese foreign ministry spokesperson Mao Ning made the remarks when asked to comment on media reports that an International Monetary Fund (IMF) team will travel to China this week to discuss faster progress on debt restructuring for countries including Sri Lanka, which is trying to get an assistance package from the IMF.

Mao said China has long-standing sound cooperation with the IMF and other international economic and financial institutions.

Concerning Sri Lanka’s debt issue, Mao said China attaches high importance to Sri Lanka’s difficulties and challenges.

“We support the financial institutions in working out ways with Sri Lanka to properly solve the issue,” she said.

We also hope relevant countries and international financial institutions will work with China and continue to play a constructive role in helping Sri Lanka overcome the current difficulties, ease its debt burden and realize sustainable development, she added.

Sri Lanka won’t be able to resolve its debt restructuring problems without help from China as the country teeters on the brink of economic collapse, according to analysts.

China may become the key factor in deciding the timing of the International Monetary Fund (IMF)’s loan disbursement for Sri Lanka to ease the ongoing unprecedented economic crisis, local and international analysts say.

China has agreed to help Sri Lanka in facing the economic crisis, but so far has not committed for any debt restructuring plan, government officials who are dealing with the debt structuring said

The completion of debt restructuring – either through a haircut or rescheduling the debts – is mandatory for the approval for the IMF loan from the global lender’s Executive Board.

China has, instead, proposed a refinancing strategy: more lending by China to Sri Lanka in order to repay Beijing’s own debts in the past.

Sri Lanka has defaulted on its debt, plunging the island nation into its worst financial crisis since independence in 1948. In addition to fuel shortage, the country also faces the prospect of running out of food, staples and medicines.

Public frustration over the deepening economic crisis has spilled over to raging street protests in recent months. President Gotabaya Rajapaksa, who has been blamed for the economic mismanagement, was forced to resign and fled overseas last week as anger toward his government spiraled.

China’s willingness to provide substantial debt relief to Sri Lanka will be vital to accelerate the debt restructuring and in helping the country get out of its current situation, said an economic expert.

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