Sri Lanka president wants China to dramatically change stance on debt relief
ECONOMYNEXT – Sri Lanka is urging China to dramatically change its stance on debt relief, Tokya-based Nikkei Asia quoted President Ranil Wickremesinghe as saying.
In an interview published on Wednesday August 24, the financial news website said Wickremesinghe had conceded that reaching a deal with China will be no simple task.
“We have informed the Chinese government [of] the need to restructure [the debt] and the need for all the creditors to sing from the same hymn sheet,” Wickremesinghe told Nikkei.
The website reported that Wickremesinghe sees a complex path to spurring a change of heart in Beijing, hinging partly on Sri Lanka’s other lenders.
“China, of course, has adopted a different approach, so it is a question of what is the agreement that the [other creditor] parties can reach with China,” he had said.
Wickremesinghe met visiting a International Monetary Fund team in Colombo Wednesday evening for a round of discussions as the country tries to strike a staff level agreement with a credible economic programme to negotiate with creditors to re-structure their debt.
China is Sri Lanka’s largest bilateral creditor, and so far hasn’t indicated a willingness to help restructure Sri lanka’s debt, showing instead a preference to refinancing loans.
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Sri Lanka President meets IMF to hammer out credible plan for creditors
Nikkei speculated in its report that Sri Lanka’s efforts to negotiate with China on its debt would feature prominently in Wednesday’s round of discussions with the IMF.
In a statement prior to the IMF visit, the organisation had said in a statement: “Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the [Extended Fund Facility] program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored.”
“Sri Lanka will have to convince the Chinese to come on board with a haircut,” Nikkei Asia quoted Murtaza Jafeerjee, managing director of JB Securities, a financial consultancy in Colombo, as saying. “Chinese debt [to Sri Lanka] is in dollars … and it would not be in China’s interest to be a spoiler.”
Commenting on Sri Lanka’s youth-led protests, President Wickremesinghe told Nikkei: “People have a right to be concerned about the economy which affects their lives.
“There has been a drop in living standards … a drop in their purchasing power. What we are witnessing now is the fast contraction of the economy.”
Commenting on a recent controversy surrounding a port call by a Chinese tracking vessel, Wickremesinghe had said: “The geopolitical situation [in the Indian Ocean] is heating up, but so far we have been able to keep it out and look at our [debt problem] in a purely economic manner.
“But there will be issues [with] how the debt is being treated and how the debt relief is to be treated. They will have some geopolitical implications.” (Colombo/Aug25/2022)
