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China offers Sri Lanka debt moratorium as IMF help remains doubtful

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China offers Sri Lanka debt moratorium as IMF help remains doubtful

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China offers Sri Lanka debt moratorium as IMF help remains doubtful

Asian giants China and India are the most important bilateral lenders to Sri Lanka, an island-nation of practically 22 million individuals that’s going through its worst financial disaster in seven a long time. Representational picture. AFP

Colombo: China’s Export-Import Bank has provided Sri Lanka a two-year moratorium on its present debt and stated it should assist the nation’s bid to safe a USD 2.9 billion mortgage from the International Monetary Fund (IMF) to tide over the unprecedented financial disaster.

Asian giants China and India are the most important bilateral lenders to Sri Lanka, an island-nation of practically 22 million individuals that’s going through its worst financial disaster in seven a long time.

Earlier in January, India wrote to the IMF saying it might decide to supporting Sri Lanka with financing and debt aid, however the island nation additionally wants the backing of China as a way to attain a ultimate settlement with the worldwide lender.

But, China’s January 19 letter, despatched to the finance ministry, will not be sufficient for Sri Lanka to instantly acquire the IMF’s approval for the vital mortgage, Sri Lankan officers with data of the matter stated.

According to the letter, China Exim Bank stated it was going to supply “an extension on the debt service due in 2022 and 2023 as an immediate contingency measure” based mostly on Sri Lanka’s request.

“You will not have to repay the principal and interest due of the bank’s loans during the above-mentioned period,” the letter stated, including China’s Exim Bank needed to expedite the negotiation course of together with your aspect concerning medium and long-term debt therapy on this interval.

By the top of 2020, Sri Lanka owed China’s Exim Bank USD 2.83 billion or 3.5% of the island’s exterior debt, in accordance with IMF knowledge.

Sri Lanka owes Chinese lenders a complete of USD 7.four billion, or practically a fifth of public exterior debt, by end-2022, calculations by the China Africa Research Initiative confirmed.

“The bank will support Sri Lanka in your application for the IMF Extended Fund Facility (EFF) to help relieve the liquidity strain,” China’s letter added.

A spokesperson for the IMF confirmed that its administration obtained India’s dedication however didn’t touch upon the Chinese letter.

Sri Lankan media experiences prompt that the nation anticipated extra help from China and had hoped for a transparent assurance from Beijing alongside the strains of what India offered to the IMF.

“China was expected to do more,” a Sri Lankan official stated, “This is much less than what is required and expected of them.”

Debt Sustainability

In a letter immediately addressed to the IMF, India final week stated that the financing or debt aid offered by the Export-Import Bank of India can be in keeping with restoring debt sustainability below the IMF-supported program.

Another authorities official with direct data of the talks stated that Sri Lanka would doubtless share China’s letter with the IMF and search their opinion on its contents to gauge if stronger assurances have been wanted.

Sri Lanka’s central financial institution chief P. Nandalal Weerasinghe stated on Tuesday the nation hoped to finish its debt restructuring in six months.

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