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US and China debate on SL debt restructure amid Paris Club word on cards

US and China are exchanging words on Sri Lanka’s ongoing debt restructuring process to gain IMF board approval for US$ 2.9 billion bail out loan,amidst speculations on the likelihood of Paris Club assurance for debt rescheduling.

India is the only creditor which has given its assurance in a letter to the IMF following proper procedure so far among all critors of Sri Lanka although Japan and China have indicated their willingness to support the debt restructuring process, official sources confirmed.

The Paris Club of creditor nations is ready to provide financing assurances to Sri Lanka, a key step needed to unlock a $2.9 billion bailout by the International Monetary Fund (IMF), two sources with direct knowledge of the matter told Reuters.

The informal group of bilateral lenders is set to “soon” announce its support to the crisis-hit nation on a debt overhaul, said one of the people, who asked not to be named because talks are private

Chinese Foreign Ministry Spokesperson Mao Ning has retaliated to comments made by US Under Secretary of State for Political Affairs Victoria Nuland during her visit to Sri Lanka that terms extended by China to Sri Lanka for getting IMF debt relief are not enough.

While the IMF has not yet provided any guidance on where the lender stands regarding China’s assurances to Sri Lanka, a U.S. official visiting Colombo said on Wednesday that Beijing has not done enough.

“What China has offered so far is not enough. We need to see credible and specific assurances that they will meet the IMF standard of debt relief,” U.S. Under Secretary of State for Political Affairs Victoria Nuland said .The U.S. is the largest IMF member.

“Rather than jabbing fingers at China’s close cooperation with Sri Lanka, the US might as well show some sincerity and actually do something to help Sri Lanka weather through the current difficulties,” Ning said responding to journalists at a regular press conference on Thursday (02).

“What was said by the US side does not reflect the truth. The Export-Import Bank of China has already provided Sri Lanka with the letter to express support for its debt sustainability. Sri Lanka has responded positively and thanked China for that,” she added.

“China stands ready to work with relevant countries and international financial institutions and continue to play a positive role in helping Sri Lanka navigate the situation, easing its debt burden, and helping it achieve sustainable development,” the Chinese Foreign Ministry Spokesperson assured.

Sri Lanka’s public debt stood at 122 percent of GDP, of which 70 per cent is denominated in foreign currency, according to data in a country presentation to investors in November.

China and India, both non-Paris Club members, are the top bilateral lenders. “Paris Club assurance is not reliant on China,” said the source.

Another source said the informal group is currently reaching out to other non-Paris Club besides China on financing assurances, but did not provide any further details.

India previously committed to help ease the debt burden of neighbour Sri Lanka as part of the IMF programme, and China’s Eximbank offered a two-year moratorium in a letter sent to the island nation in January.

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