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.

The Government is seriously considering the possibility of forming joint ventures for Mattala and Ratmalana international airports separately due to its heavy losses of revenue in dwindling traffic and passenger slump in the present social unrest and economic crisis.

Both these airports are not generating enough income even to meet the operating expenses including the payment of salaries of its staff, transport costs and maintenance expenditure, a senior official of the Ports and Aviation Ministry said.

The new administration is looking at the option of resurrecting the two airports by entering into joint venture partnerships with a foreign aviation companies because the profits as well as the losses will be shared by the parties at an agreed ratio.

If two airports are folded, its buildings and facilities are still there and someone else would have to take it over on long term lease basis, he said.

“Sometimes back Airport Authority of India has submitted its business plan for operating the loss-making Mattala Rajapaksa International Airport (MRIA) by entering into a 70-30 joint venture agreement, he disclosed pointing out that but  it was not a sell-out”

However this business plan was not materialized due to pre-conditions put forward by the Sri Lanka side , he added.

Mattala Rajapaksa International airport has now become the lease used airport in the world and it has earned meager revenue of around Rs.474 million during the past eight year period since its opening in 2013, a recent report prepared by the treasury revealed.

Its expenditure was whopping Rs 14.4 billion while the T income generation of the Katunayake Bandaranaike International Airport is being used for the maintenance of Mattala Airport.

The construction cost of US$ 247.7 million was borne from loans provided by China Exim Bank ($190 million), the China Harbor Engineering Company ($ 40 million) and the balance by Sri Lankan government.

 Sri Lanka’s first and oldest international airport, the Ratmalana airport upgraded as Colombo International Airport- Ratmalana was reopened on March 27 after nearly five decades.

According to aviation ministry official, a flight from the Maldives landed at Sri Lanka airport, the first flight arrived there in 54 years.

It was planned to operate the 50-seater Maldivian flight according to a schedule of three flights every week to Colombo and it has to expand up to five flights per week in the coming months.

The national carrier Maldivian, the first to land at the Ratmalana airport as the first international regional flight operations from Velana Airport, was called off within 96 hours.

It has been revealed that some of the top officials had suggested this route without even assessing whether this route is marketable or not.

At the moment this airport operation has been folded and it is not generating any income after spending around Rs 6 million on the exorbitant gala launching ceremony with a celebratory water cannon salute upon arrival of the inaugural Maldivian flight, report divulged.

Former Secretary to the Ministry of Finance Mr. S.R. Attygalle says it is unreasonable to claim that the country lost nearly Rs. 500 billion due to the change in tax policies of the new government, as this was due to the loss caused by the import restrictions imposed, including the suspension of the import of vehicles, and the economic contraction caused by the Covid situation.

He made these observations while speaking at a meeting of the Committee on Public Finance held in Parliament yesterday (08) under the chairmanship of MP Anura Priyadarshana Yapa.

Mr. Attygalle further stated that these decisions regarding tax policies were taken in keeping with the first Cabinet Paper presented by the former Prime Minister Mahinda Rajapaksa on December 04, 2019.

Former Secretary to the President Dr. P.B Jayasundara, former Secretary to the Ministry of Finance S. R. Attygalle, former Governor of the Central Bank Ajith Nivard Cabraal, former members of the Monetary Board, current Governor of the Central Bank Dr. Nandalal Weerasinghe and other senior officials of the Central Bank were summoned before the Committee yesterday.

The Members of the Finance Committee were of the view that in presenting a Cabinet Paper, there should be a background note and a report on the subject matter concerned and that the officials in charge of the subject should take responsible for it. 

Though, there were some unavoidable circumstances, which arose at the time, decisions should have been taken after a proper study by the Central Bank and the Ministry of Finance, the committee members said.

The Members of the Committee on Public Finance further inquired whether any action had been taken by any of the Economists and Professionals in writing to submit a report containing clear conclusions of the Monetary Board with regard to the monetary policy decisions taken by the then political authority.

Former Secretary to the President Dr. PB Jayasundara said that such decisions would be tabled in Parliament are then referred to Committees.

Members of the Committee on Public Finance again inquired as to whether the economists and professionals had duly pointed out and informed their superiors as responsible officials of the Government at that time, regarding the incorrect policy decisions taken by the political authorities.

The current Governor of the Central Bank (Dr.) Nandalal Weerasinghe said that responsible government officials should refrain from engaging in politics and that the difference between a politician and an official should be properly recognized. 

He further said that it is the responsibility and duty of the officials to inform the politicians when they are not correct and the politicians alone are not responsible for the consequences of such decisions.

The MPs who participated in the committee said that although they had told the responsible officials and the then political authorities on various occasions about the possible side effects of such policies, no one had paid attention to them.

The Chairman of the Committee Anura Priyadarshana Yapa also emphasized that the relationship between the officials of the Central Bank and the Parliament should be enhanced and a proper communication process should be established when making important decisions pertaining to the country.