Washington February 3 2023: China called on the International Monetary Fund to provide urgent assistance to Sri Lanka, saying that its state-owned bank had offered relief and urging other creditors to act swiftly in supporting the troubled island nation.
“China also calls on the IMF to fully consider the urgency facing Sri Lanka and offer debt support as soon as possible so as to better relieve the liquidity strain facing Sri Lanka,” Foreign Ministry spokeswoman Mao Ning told reporters in Beijing on Friday. “China will continue to support relevant financial institutions to consult with Sri Lanka over debt treatment,” she said.
China accounts for 52% of Sri Lanka’s bilateral loans and a formal assurance of support to Sri Lanka’s debt restructuring is the last hurdle to unlocking a $2.9 billion IMF bailout. Mao didn’t address whether China is officially backing Sri Lanka’s debt plan, which is a condition for the IMF to approve the loan.
Instead, she described China as “the first bilateral official creditor that took the initiative” with a debt extension to Sri Lanka and called on those who lent to the South Asian nation “especially multilateral creditors, to take similar measures in sync, offer effective and strong support to Sri Lanka.”
India and the Paris Club of creditors have given their assurance to the debt restructuring that’s dragged since Sri Lanka defaulted in May last year, with lenders previously bickering on the size of losses they’re willing to accept and whether local debt should be included in the discussions.
Without China’s formal assurance of support to the debt recast, Sri Lanka’s path to getting the bailout, unlocking more assistance and setting a more sustainable recovery, remains uncertain. What Beijing has done so far is for its Export-Import Bank of China to provide Sri Lanka an extension on debt service due in 2022 and 2023 and also waived interest during the period.
Separately, a group of Sri Lanka’s dollar bondholders on Friday said it has written to the IMF expressing their willingness to engage in debt restructuring talks.
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