Sri Lanka asks China to restructure its loans amid crisis
As the island struggles in the throes of its worst economic crisis, Sri Lanka's President requests Chinese Foreign Minister Wang Yi to restructure repayments of debt, in the latter's visit to Colombo.
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Ministers from Sri Lanka and China signing agreements in Colombo, Sunday, Jan. 9, 2022. (AP)
Sri Lanka, extremely short on funds, was seeking to reschedule its gigantic debt burden in Sunday talks during the Chinese foreign minister Wang Yi’s visit to Colombo, according to the president's office.
The island's economy, which depends on tourism, has been hit hard by the pandemic, and due to its drained foreign exchange reserves, Sri Lanka now suffers from a lack of essential goods and food rationing at supermarkets.
Wang’s visit comes in the light of China being its biggest lender and following some international ratings agencies warnings to Sri Lanka’s president that his country could be on the brink of bankruptcy.
"The President pointed out that it would be a great relief if debt payments could be rescheduled in view of the economic crisis following the pandemic," Gotabaya Rajapaksa's office said in a statement.
The foreign reserves of Sri Lanka's dropped to $1.5 billion at the end of November, an amount that is enough to pay for just a month's worth of imports.
The main energy utility started to ration electricity on Friday after the island’s ran out of foreign currency to buy oil.
As per government data, China accounted for about 10 % of Sri Lanka's foreign debt of $35 billion to April 2021.
Officials said that the total lending of China could be much higher if it takes into consideration the loans to state-owned companies and the central bank.
Not only did Sri Lanka borrow heavily from China, but it is also unable to pay back a $1.4 billion loan for a port construction in southern the island, which led Colombo to lease out the facility to a Chinese firm for 99 years in 2017.
How do some other countries react to this?
India and the United States were concerned about the purpose of China renting the Hambantota port, which is located along vital east-west international shipping routes, believing it could grant China a military toehold in the Indian Ocean.
However, Sri Lanka and China have both disclaimed the use of Sri Lankan ports for any military purposes.
