Sri Lanka begins debt restructuring talks with China, thanks India for support during crisis

Colombo: Sri Lanka President Ranil Wickremesinghe informed the Parliament Thursday that the government has started initial debt restructuring discussions with China, which is an important step to revive the island nation that is facing its worst-ever economic crisis.

The President informed the Parliament that the discussions will continue after the National Congress of the Chinese Communist Party starting October 16.

“I am sure that China would help us at this critical juncture,” Wickremesinghe told the Parliament, adding that Japan has agreed to intervene with regard to restructuring debts with China.

Sri Lanka plans to soon strike a deal with the creditor nations, including India, Japan and China, to facilitate debt restructuring.

The International Monetary Fund (IMF) has agreed to a conditional $2.9 billion bailout plan for the island nation, but Sri Lanka first has to strike deals on restructuring its debts with the creditor countries.

China is a key factor on this count, but it has not yet committed to any debt restructuring plans. Instead, it has proposed more lending to pay Beijing’s past debts.

During his address, Wickremesinghe also thanked Prime Minister Narendra Modi for India’s extensive support during the crisis faced by Sri Lanka.

“We always received support from Prime Minister Modi. During the recent crisis, we received extensive support from India and I have extended my gratitude to them on several occasions,” the Sri Lanka President said.

Wickremesinghe also told the Parliament that Sri Lanka would continue to get the support of India to come out of the ongoing crisis.

“We have already received positive responses from India,” the President said, adding that he spoke to Prime Minister Modi when he met him in Japan recently.

The other leading Asian creditor to Sri Lanka, Japan, has agreed to a credit reconciliation process and also to co-chair the debt restructuring talks with countries which had provided debts.

Announcing the plans to come out of the crisis, Wickremesinghe said he hopes to reach a common agreement with the creditor nations, including Japan, China and India, adding that dialogues have commenced with envoys from other countries that provided debts.

“Following discussions with countries that provided debts to Sri Lanka, we expect to discuss with private creditors such as London Club on debt restructuring,” Wickremesinghe said.

Securing an IMF assurance, Sri Lanka plans to bridge finances with lenders like the World Bank and the ADB after reaching agreements with the creditor nations and private lenders.

The President said he hopes to access around $1 billion through bridging financing while the ADB has already agreed to $500 million financial assistance.

Wickremesinghe also said that inflation of food prices has rocketed to 95 per cent, a situation that was not experienced by the island nation even during World War II.

However, the President said if everything works according to plans, the economy could improve by the middle of next year.

IANS