The Exim Bank of China, the top Chinese lender to Sri Lanka has reached a “preliminary” agreement with the island, a media report said, raising prospects making progress on restructuring the defaulted island’s debt.
The debt agreement was reached at the end of September, Bloomberg Newswires quoted Chinese Foreign Ministry Spokesman Wang Wenbin was quoted as saying in Beijing on October 10.
Sri Lanka has to make progress acceptable to the International Monetary Fund to unlock a second 330 million dollar tranche and continue to be eligible for budget support loans from the Asian Development Bank and World Bank.
China is also talking to Sri Lanka’s other creditors known as the Paris Club, the spokesman was quoted as saying.
It is not clear whether the “preliminary” agreement on restructuring is acceptable to the IMF as sufficient progress.
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Sources familiar with the talks said there appeared to be a ‘softening’ of China’s stance of late.
Out of 6,850 million dollars owed to China, the Exim Bank had loaned 3,992 million dollars.
China Development Bank had loaned another 535.2 million dollars classified as bilateral. The CDB gave another 2,185 million term loan classified as a commercial credit.
“All creditors are engaging positively with us,” State Minister for Finance Shehan Semasinghe said last month.
“We expect decisions from all our creditors. For us earlier the better.”
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Sri Lanka’s Western lenders, known as the Paris Club has a well-oiled mechanism to restructure debt, which is a ‘done deal’ according to those familiar with the workings of the organization.
Sri Lanka President Ranil Wickremesinghe is expected to visit China shortly.