India, China and Debt restructuring

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Media on Saturday reported that Sri Lanka has ‘finally’ granted permission to the controversial Chinese missile tracking/surveillance/spy ship ‘Yuan Wang 5’ to dock at the Hambantota Port tomorrow. It will be at Hambantota for six days.

It was only on the previous day, Friday, that India’s External Affairs Ministry Spokesman Arindam Bagchi, speaking to reporters from his office in New Delhi said, “Sri Lanka is a sovereign country and makes its own independent decisions.”

He was responding to a question raised by a CNN reporter who asked, “There’s a Chinese vessel in Sri Lankan waters which was supposed to be docked in Hambantota from 11-17 August. It has not been docked. Chinese Foreign Affairs Ministry has said that it’s because of India’s pressure on Sri Lanka?”

Coinciding with these developments in Delhi on Friday, Colombo, the following day, Saturday, granted permission for this controversial Chinese ship to dock in Hambantota.

Sri Lanka is seeking an IMF loan to get over its foreign exchange crisis. However, an IMF pre-condition to obtain this loan is that Sri Lanka needs to renegotiate/restructure its foreign debt with its creditors. All of its foreign creditors have agreed to restructure their loans to Sri Lanka, including the ‘G7’ countries, other than China.

China’s definition of ‘restructuring’ is to give a new loan of unknown interest to repay the existing loan.  However, of late, China has made ‘noises’ to the effect that it plans to go along with international agencies in restructuring the island’s debt.

Now that the Foreign Ministry with ‘India’s blessings’ has permitted this Chinese spy ship to dock in Hambantota tomorrow, the Ministry in turn on a quid pro quo basis should be firm with China that it should give an unequivocal commitment to restructure Sri Lanka’s debt owed to it, if it has not already done so.

If China dilly dallies in debt restructuring and the masses continue to suffer by not obtaining the IMF loan, as they have already been suffering for the past two years, due to Sri Lanka’s US dollar crisis brought about by the former ruling Rajapaksa family robbing the country’s assets and which family commands the majority in the House with 145 MPs out of a total of 225, then UNP leader and the country’s President Ranil Wickremesinghe should ‘name and shame’ China.

For instance, China, recently, agreed to restructure Zambia’s debt. In the same vein, why cannot it also agree to restructure Sri Lanka’s debt?

In this connection, the South China Morning Post in its 4 August issue reported, “China has invited Zambia’s private creditors to discuss the nation’s debt later this month after official creditors agreed to a restructuring of its debt, according to Beijing’s ambassador to Lusaka.

“Zambia’s creditors pledged to negotiate a restructuring of the country’s debts in a move welcomed by IMF managing director Kristalina Georgieva as ‘clearing the way’ for a US$1.4 billion relief programme.

“The creditor committee, co-chaired by China and France, also called on private creditors to ‘commit without delay’ to negotiating debt relief on terms at least as favourable.

“If the official creditors from China agree with the restructuring process, then the private sector from China will follow with comparable terms to deal with the debt issue for Zambia,” Chinese Ambassador to Zambia Du Xiaohui told a public discussion on 4 August.

“There is an invitation from co-chair China to other private creditors to have a friendly conversation on the Zambian debt issue this month.”

In 2020, Zambia became the first African country in the pandemic era to default. The restructuring of its external debt, which amounted to more than US$17 billion at the end of 2021, is seen by many analysts as a test case.

The first bilateral creditor meeting was held in June after Zambia’s government complained of delays to the restructuring.

Talks are taking place under the Common Framework, a debt relief process launched by the Group of 20 major economies in 2020 which has been criticised by some for being slow to yield results.”