COLOMBO - Sri Lanka expects to get China’s backing for its debt restructuring plan within days to help unlock a US$2.9 billion (S$3.8 billion) loan from the International Monetary Fund, a government official said on Friday.
India has already pledged further support to its crisis-stricken southern neighbour.
The island nation of 22 million people has grappled with challenges during the past year ranging from a shortage of foreign currency to runaway inflation and a steep recession.
It is the worst such crisis since independence from Britain in 1948.
Sri Lanka is racing to secure a bailout from the IMF.
But it requires the backing of both China and India, its biggest bilateral lenders, to reach a final agreement with the global lender.
India has already told the IMF it strongly supports Sri Lanka’s debt restructuring plan and China, the island’s largest bilateral lender, is the last major creditor that has yet to agree to the deal.
“It is difficult to give details of the debt restructuring negotiations because of the confidentially of discussions,” Deputy Treasury Secretary Priyantha Ratnayake told reporters. “However, we can say that discussions with China are at the final stage and we expect their assurances in the next few days.”
Ms Ratnayake said China has been engaging with his country consistently and Sri Lanka President Ranil Wickremesinghe had earlier this month with the head of China’s EXIM Bank, which is a key creditor.
Sri Lanka owed Chinese lenders US$7.4 billion, or nearly a fifth of its public external debt, by the end of last year, calculations by the China Africa Research Initiative show.
During a visit on Friday, Indian Foreign Minister Subrahmanyam Jaishankar said New Delhi is committed to boosting investment in Colombo.
Mr Jaishankar, on a two-day visit, held talks on Thursday with his Sri Lankan counterpart, Mr Ali Sabry, on co-operation in infrastructure, connectivity, energy, industry and health services.
“India will encourage greater investments in the Sri Lankan economy, especially in core areas like energy, tourism and infrastructure,” Mr Jaishankar told reporters in the city of Colombo.
“We count on the government of Sri Lanka to provide a more business friendly environment to create a powerful pull factor.”
On Friday, Mr Jaishankar met Mr Wickremesinghe, and they are expected to sign a memorandum of understanding for a renewable power project covering three islands in Sri Lanka’s north.
India has told the IMF it strongly supports Sri Lanka’s debt restructuring plan, with Sri Lanka owing about US$1 billion to its nearest neighbour.
“We felt strongly that Sri Lanka’s creditors should take proactive steps to facilitate its recovery,” Mr Jaishankar added.
“India decided not to wait on others but to do what we believe is right. We extended financial assurances to the IMF to clear the way for Sri Lanka to move forward.” REUTERS
