China promotes refinancing instead of debt restructuring for Sri Lanka

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A spokesman for the Chinese Embassy in Sri Lanka said China has agreed to provide refinancing facilities for maturing Chinese loans and advances this year, instead of joining the debt restructuring process in Sri Lanka.

China has agreed to provide another $ 1 billion in refinancing facility for a $ 996 million loan from the China Development Bank, which matures this year.

“Obtaining Chinese consent (which represent 10% of total external debt) to Sri Lanka’s debt restructuring process might be the hardest challenge for financial adviser Lazard as China is still negotiating with Sri Lankan authorities to keep its debt servicing activities alive via their refinance process,” experts said.

Sri Lanka has, however, decided to turn down the Chinese refinancing offers while giving equal treatment to all external loan providers.  

If China delays supporting the debt restructuring process, deals with the IMF could be delayed, as restructuring and debt sustainability is a key condition of the IMF.

By Ishara Gamage