The Government is in talks with China over an alternative debt restructuring option, and the Finance Minister is scheduled to brief Parliament about it in detail, Co-Cabinet Spokesman Dr. Nalaka Godahewa said.
“Rather than debt restructuring, China has stated that it is willing to grant us another loan to cover debts given by them. It is still in the early stages of negotiation, and I’m hoping the Finance Minister will give a detailed explanation in Parliament,” he said.
Addressing the media yesterday (26) at the weekly Cabinet media briefing, Dr. Godahewa said Western countries are mostly in the process of extending assistance for a debt restructuring proposal backed by the IMF.
However, China stated that because it has been lending money to many countries around the world, debt restructuring for one country could have an impact on other countries as well, he added.
He claimed that China and Sri Lanka had disagreements as to how to restructure their loans, which totalled more than USD 3 billion.
Sri Lanka had decided to restructure its obligations to conserve money for vital imports while seeking assistance from the International Monetary Fund (IMF).
Sri Lanka, according to Dr. Godahewa, requires roughly USD 4-5 billion in emergency funds to deal with the economic crisis, which has now morphed into a political crisis, with many calling for President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, to quit.
Meanwhile, China said the Government’s decision to seek a bailout from the IMF at such short notice will unavoidably have an influence on future bilateral engagements with China.
“We shall wait and closely monitor how the negotiations are going at the IMF,” Chinese Ambassador to Sri Lanka Qi Zhenhong said addressing a group of senior journalists.
The USD 2.8 billion loan facility restructuring is on hold, as Sri Lanka has reached out to the IMF for a maximum USD 4 billion bailout target.
“China has done its best to support Sri Lanka so far during the crisis, but the suspension of the debt repayment mechanism that is going on with China is very sad to learn.”
Sri Lanka said on 12 April that it will halt repayment of international debts due to a lack of foreign reserves. Global rating agencies have downgraded the country four times since then.
BY Thameenah Razeek