Sri Lanka’s President Gotabaya Rajapaksa has sought debt relief and import credit from China, following a meeting with visiting Chinese foreign minister Wang Yi, his office said.
“The President pointed out that it would be a great relief to the country if the attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the Covid-19 pandemic,” a statement from the President’s media office said.
“The President also said that if a concessional trade credit scheme could be initiated for imports from China, it would enable the industries to operate smoothly.”
Sri Lanka is facing forex shortages and lost reserves due to money printed to keep interest rates down after cutting taxes in a fiscal and monetary ‘stimulus’ amid a Coronavirus pandemic.
Sri Lanka had also signed several grant agreements for housing, medical and refurbishing a conference hall in Colombo gifted by China.
Sri Lanka had about 3.5 billion US dollars in central government debt from China by the end of 2020, not counting loans to state enterprises.
China’s Foreign Minister arrived in Sri Lanka after an escalating dispute over a contaminated organic fertilizer was settled.
An International Monetary Fund report in 2019 said about 9.1 percent of external central government debt was owed to China and when counting SOEs it was about 15 percent by the end of 2018.
Sri Lanka’s central bank also drew down on a 1.5 billion US dollar equivalent Renminbi swap in December 2021 to boost year end reserves to 3.1 billion US dollars or about 2 months of imports.
India is also expected to give around 400 million US dollars through a swap, and a 500 million US dollar credit line for fuel. Another billion dollars of credits are expected from India.