China reiterates commitment to financial assistance for Sri Lanka

By Al Mayadeen English
Source: Agencies
30 Mar 2024 08:49

The commitment comes after the prime minister of the crisis-hit island nation concluded a visit to Beijing aimed at finalizing a debt restructuring agreement.

Sri Lankan Prime Minister Mahinda Rajapaksa (right) presents a souvenir to Chinese Foreign Minister Wang before their meeting in Colombo, Sri Lanka, Sunday, January 9, 2022. (AP)

China has reaffirmed its commitment to supporting Sri Lanka, as the prime minister of the crisis-stricken island nation concluded a visit to Beijing to finalize a debt restructuring agreement.

Prime Minister Dinesh Gunawardena arrived in China on Monday, where he met with President Xi Jinping and participated in the Boao Forum, a significant international gathering. The ongoing economic crisis in Sri Lanka was a key focus of Gunawardena's trip, with China representing approximately 10 percent of the country's total foreign debt.

In the Chinese version of a joint bilateral statement released on Friday, Beijing's Foreign Ministry expressed willingness to "continue supporting its financial institutions to actively negotiate with Sri Lanka, maintain friendly communication with other creditors, play a positive role in the International Monetary Fund, assist Sri Lanka in financial relief."

The statement also highlighted the agreement between the two sides to "make every effort to promote the Port City Colombo and Hambantota Development Project, turning them into flagship projects of the Sino-Sri Lankan joint construction of the 'Belt and Road'."

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Former Sri Lankan President Mahinda Rajapaksa's tenure saw the launch of the Hambantota Development Project, which was considered one of the white-elephant projects during his decade-long rule until 2015.

In 2017, unable to repay a substantial loan taken from China for the construction of the Hambantota port, Sri Lanka transferred it to the state-owned China Merchants Group for $1.12 billion under a 99-year lease.

In April 2022, Sri Lanka defaulted on its $46 billion external debt when it ran out of foreign exchange to cover essential imports like food, fuel, and medicine. To address its financial woes, Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF) last year. However, the IMF program is contingent on reaching a debt agreement satisfactory to foreign creditors.

While China tentatively agreed to restructure Sri Lanka's debt in December, both Colombo and Beijing have yet to finalize the details of an agreement.