Sri Lanka asks China for debt restructuring amid cash crisis

China’s foreign minister Wang Yi, left, met Sri Lankan president Gotabaya Rajapaksa in Colombo on 9 January 2021 (Courtesy of the Office of the President of Sri Lanka)
Sri Lankan president Gotabaya Rajapaksa used a meeting yesterday with China’s foreign minister Wang Yi to ask for a restructuring of debt repayments to help it cope with a liquidity crunch brought on by the coronavirus pandemic.

“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 Rajapaksa’s office said yesterday.

The south Asian island nation’s tourism industry has been damaged by Covid, while rising inflation threatens to push many into poverty.

The World Bank estimates that Sri Lanka’s GDP contracted by 3.6% in 2020 and that poverty, defined as people subsisting on $3.20 a day or less, is expected to have increased to 11.7% of the population in 2020 from 9.2% in 2019, sending a decade of steady poverty alleviation into reverse.

According to Reuters, China has lent Sri Lanka more than $5bn for new infrastructure over the past 10 years, including ports, an airport, highways and a coal power plant.

In 2019, China’s Export Import bank approved a $1bn loan to build the Central Expressway, a motorway between the Sri Lankan capital of Colombo and the central city of Kandy.

China is Sri Lanka’s fourth biggest lender, behind international financial markets, the Asian Development Bank (ADB) and Japan, said Reuters.

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