Debt refinancing: Lanka pins hopes on China

Advertisement

China is Sri Lanka’s biggest creditor having provided the Island nation with USD 3.5 billion of credit…reports Asian Lite News

After talks with International Monetary Fund (IMF) amid the ongoing economic crisis in the country, Sri Lanka’s Mass Media Minister Nalaka Godahewa on Tuesday said that the country is in talks with China as well for refinancing its debt.

“Now that IMF (International Monetary Fund) is ready to cooperate with Sri Lanka, other countries are aware that we have support. We were guaranteed the support of the World Bank and other (financial) agencies,” Godahewa said, adding that the negotiations with Beijing are at an early stage, Sputnik reported.

China is Sri Lanka’s biggest creditor having provided the Island nation with USD 3.5 billion of credit, the report said citing local media.

Last Tuesday, the Sri Lankan Finance Ministry said the IMF and India pledged assistance to mitigate the economic crisis that has gripped the country.

An IMF official on Tuesday advised Sri Lanka to tighten its monetary policy, raise taxes and adopt flexible exchange rates to overcome its debt crisis, according to media reports.

“We’ve had very good, fruitful, technical discussions on preparations for the negotiations with authorities over the past weekend and a couple of days before,” Xinhua quoted Anne-Marie Gulde-Wolf, acting director of the IMF’s Asia and Pacific Department, as saying during an online event.

“The requirement for fund lending will be progress toward debt sustainability. Monetary policy has to be tightened to keep inflation in check. We see a need for flexible exchange rates,” she added.

However, the IMF official refrained from commenting on the value of any IMF package, or an estimated time needed to come into an agreement with the island nation.

Sri Lanka is facing one of its worst economic crises resulting in widespread protests against the Rajapaksa family leaders, including President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa.

The recession is attributed to foreign exchange shortages caused by a fall in tourism during the COVID-19 pandemic, as well as reckless economic policies, which have resulted in the country being unable to buy enough fuel, and people facing an acute scarcity of food and basic necessities, heating fuel, and gas.

The island nation has been gripped by an economic crisis, considered the worst since the country gained independence in 1948. Due to energy shortages, some parts of Sri Lanka have rolling blackouts. Sri Lanka’s foreign debt is estimated at USD 51 billion.

Sri Lanka appears to be on the edge of a “humanitarian crisis”, according to the United Nations Development Programme, as its financial troubles grow, with rising food prices, and the country’s coffers have run dry.

According to World Bank estimates, five lakh people in Sri Lanka have fallen below the poverty line since the onset of the crisis. (ANI)

ALSO READ: Lanka PM sees no reason to step down