Friday, 21 January, 2022

Sri Lanka seeks Chinese debt reschedule for crashing economy

COLOMBO: Cash-strapped Sri Lanka sought to reschedule its huge Chinese debt burden in Sunday talks with visiting foreign minister Wang Yi, the president’s office said.

The island’s tourism-dependent economy has been hammered by the pandemic and its depleted foreign exchange reserves have led to food rationing at supermarkets and shortages of essential goods, reports AFP.

Key ally China is Sri Lanka’s biggest bilateral lender and Wang’s visit comes after a warning from international ratings agencies that President Gotabaya Rajapaksa’s government could be on the brink of default.

“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,” Rajapaksa’s office said in a statement.

There was no immediate comment from the Chinese embassy in Colombo.

Sri Lanka’s foreign reserves had dropped to just $1.5 billion at the end of November—enough to pay for only about a month’s worth of imports.

The island’s main energy utility began rationing electricity on Friday after running out of foreign currency to import oil for its thermal generators.

China accounted for about 10 percent of Sri Lanka’s $35 billion foreign debt to April 2021, government data shows.

Officials said China’s total lending could be much higher when taking into account loans to state-owned enterprises and the central bank.

Sri Lanka borrowed heavily from China in the decade to 2015, when Rajapaksa’s elder brother Mahinda was president, to build ambitious infrastructure projects, some of which ended up as white elephants.

Unable to repay a $1.4 billion loan for a port construction in the island’s south, Colombo was forced to lease out the facility to a Chinese company for 99 years in 2017.

The United States and regional power India warned that the Hambantota port, located along vital east-west international shipping routes, could give China a military toehold in the Indian Ocean.

Both Colombo and Beijing have denied that Sri Lankan ports will be used for any military purposes.