Lanka urges India, China to reduce debts

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Sri Lanka, which is currently amidst the worst-ever economic crisis since its independence in 1948, defaulted on its debt repayments and negotiated a $2.9 billion bailout….reports Asian Lite News

The Central Bank of Sri Lanka has urged creditors India and China to agree a write-down of their loans as soon as possible in an effort to “help us to start repaying their obligations”.

Speaking to the BBC on Wednesday night, the bank’s Governor P. Nandalal Weerasinghe said: “The sooner they give us finance assurances that would be better for both (sides), as a creditor, as a debtor. That will help us to start repaying their obligations.

“We don’t want to be in this kind of situation, not meeting the obligations, for too long. That is not good for the country and for us. That’s not good for investor confidence in Sri Lanka.”

Sri Lanka, which is currently amidst the worst-ever economic crisis since its independence in 1948, defaulted on its debt repayments and negotiated a $2.9 billion bailout.

But the International Monetary Fund (IMF) will not release the funds until India and China first agree to reduce Sri Lanka’s billions of dollars of debt.

China’s lending to Sri Lanka stands at around $7 billion while India is owed around $1 billion.

The Sri Lankan government had initially hoped to agree a new payment plan with China and India by the end of 2022.

Weerasinghe told the BBC that it was possible an agreement could come later this month but added “this all depends on the other parties — our creditors really have to make that decision”.

“Sri Lanka had now provided them with all the information on the country’s borrowings they needed,” he added.

But if India and China agree to write down their loans to Sri Lanka another potential problem looms in the form of private creditors, who account for 40 per cent of the country’s external debt stock.

Asked about Sri Lanka’s private bondholders, the Governor told the BBC: “We engage with private creditors in good faith negotiations. And what we are seeing is that they are very positive and they are willing to engage with us.”

Weerasinghe said he expected that once agreement from bilateral creditors has been agreed the IMF funds could be distributed to Sri Lanka within “four to six weeks”.

Also speaking to the BBC on Wednesday night, US Ambassador to Sri Lanka, Julie Chung, said the greater onus to move was on China, as the biggest bilateral lender.

“We hope that they do not delay because Sri Lanka does not have time to delay. They need these assurances immediately. For the sake of the Sri Lankan people, we certainly hope China is not a spoiler as they proceed to attain this IMF agreement,” she added.

The Governor’s remarks came just days after a large group of international economists on January 8 called for Sri Lanka’s bonds, to be “cancelled”.

“All of Sri Lanka’s creditors must ensure debt cancellation sufficient to provide a way out of the current crisis,” they said.

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