China has said it is ready to work together with other countries to support Sri Lanka to recover from the economic crisis, following a call by neighbouring Japan to help the island nation at this crucial juncture.
“We are ready to work with the relevant countries and international financial institutions to continue to play a positive role in supporting Sri Lanka’s response to current difficulties and efforts to ease the debt burden and realise sustainable development,” Chinese Foreign Ministry spokesperson Zhao Lijian told a media briefing in Beijing on Friday evening.
“China has paid close attention to the difficulties and challenges faced by Sri Lanka,” Zhao said, adding that China has provided assistance for Sri Lanka’s socio-economic development at all times to the best of its capacity.
This follows a call by Japanese Finance Minister Shunichi Suzuki to all countries that have given loans to Sri Lanka, including China, to discuss the country’s debt restructuring after Sri Lanka reached a Staff Level Agreement (SLA) with the International Monetary Fund (IMF) for an Extended Fund Facility (EFF) of US$ 2.9 billion spread over four years.
“It’s important for all creditor nations, including China and India, to gather to discuss Sri Lanka’s debt restructuring,” Suzuki told a news conference in Tokyo. Debt restructuring and repayment sustainability are usually required for all IMF disbursements.
Responding to the Japanese Finance Minister’s request, Zhao said China supports financial institutions in consultation with Sri Lanka for proper and viable solutions for debt restructuring.
Sri Lankan has been calling upon China and other countries to restructure debt as the nation continues to face an acute economic crisis, with foreign reserves plummeting to record low levels.
It is estimated that Sri Lanka owes debt payments of US$ 1.5 - 2 billion this year to China alone. China’s loans and direct investments in Sri Lanka were estimated to be over US$ 8 billion in the past few years.
Sri Lanka’s total bilateral debt was estimated at US$ 6.2 billion at the end of 2020 by the IMF. Japan and China hold the largest shares, an IMF report said. Sri Lanka also has around US$ 14 billion in International Sovereign Bond (ISB) debt. The country’s overall foreign debt is estimated to be US$ 51 billion. Sri Lanka has officially defaulted on its overseas debt this year for the first time in its post-Independence history.
Japan has not officially confirmed media reports that it is planning to host a summit of Sri Lanka’s main creditor nations to resolve the issues pertaining to bilateral debt restructuring.
President Ranil Wickremesinghe had earlier called upon Japan to initiate such a meeting. The President is due to visit Japan soon for talks with Japanese leaders on this and other issues of bilateral and regional interest.