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Friday, February 3, 2023

China offers debt aid to crisis-hit Sri Lanka, IMF help in doubt

World NewsChina offers debt aid to crisis-hit Sri Lanka, IMF help in doubt

Export Import Bank of China Offered Sri Lanka imposed a two-year moratorium on its debt and said it would support the country’s efforts to secure a $2.9 billion loan. International Monetary FundAccording to a letter reviewed by Reuters.

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India wrote a letter to the IMF earlier this month, saying it would commit to helping Sri Lanka with financial aid and debt relief, but the island nation has been rejected by the world lender. China’s support is also needed to reach a final agreement.

A Sri Lankan source with knowledge of the matter said China’s January 19 letter to the finance ministry, however, was not enough to get Sri Lanka’s immediate IMF approval for the crucial loan. Is.

Regional rivals China and India are the biggest bilateral lenders to Sri Lanka, a country of 22 million people facing its worst economic crisis in seven decades.

According to the letter, the Export-Import Bank of China said it was going to provide “an extension of debt service due in 2022 and 2023 as an immediate emergency measure” based on Sri Lanka’s request.

At the end of 2020, China Exim Bank had lent Sri Lanka $2.83 billion, or 3.5 percent of the island’s debt, according to a report released by the IMF in March last year.

“…you will not have to repay the principal and interest of the bank loans during the said period,” the letter said.

“Meanwhile, we would like to speed up the negotiation process with you regarding the treatment of medium and long-term loans in this window period.”

As of the end of last year, Sri Lanka owed Chinese creditors $7.4 billion, or about a fifth of its public external debt, according to the China Africa Research Initiative.

“The Bank will assist Sri Lanka in your application for the IMF Extended Fund Facility (EFF) to address liquidity pressures,” the letter said.

The Sri Lankan source, who asked not to be identified because of the sensitivity of the confidential talks, said the island nation had hoped for clear assurances from Beijing similar to those provided by India to the IMF. .

Read here: India first in IMF assistance to Sri Lanka

“China was expected to do more,” the source said, “which is much less than what is needed and expected.”

Sri Lanka’s foreign and finance ministries and China’s foreign ministry did not immediately respond to questions from Reuters.

Sri Lanka’s Central Bank Governor P Nandalal Weerasinghe said on Tuesday that the country hopes that China and Japan, another major bilateral creditor, will ensure the completion of debt restructuring soon and within six months. .

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