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Tuesday, March 28, 2023
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China confirms debt moratorium to Sri Lanka

China's official lender has announced to suspend Sri Lanka's debt repayment for 2 years amidst economic crisis in the country.

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China said on Friday it granted a moratorium on debt repayment by economic crisis-hit Sri Lanka.

Chinese Foreign Ministry spokeswoman Mao Ning said the Export-Import Bank of China, as the official bilateral creditor, “provided a financing support document” to Sri Lanka’s Ministry of Finance, Economic Stabilization and National Policies on Jan. 19.

“The Bank is going to provide an extension on the debt service due in 2022 and 2023, which means Sri Lanka will not have to repay the principal and interest due of the Bank’s loans during the above-mentioned period, so as to help relieve Sri Lanka’s short-term debt repayment pressure,” Mao said at a news conference in Beijing.

The Bank would have “consultation with Sri Lanka regarding medium- and long-term debt treatment in this window period,” according to a transcript of the news conference released by China’s Foreign Ministry,

“The Bank will make best efforts to contribute to the debt sustainability of Sri Lanka,” said Mao, adding that the Chinese lender will “support” Sri Lanka in its loan application to the International Monetary Fund (IMF.)

Sri Lanka, crippled by a shortage of foreign exchange reserves after the collapse of the tourism-dependent economy, defaulted on all its foreign debt in 2021.

Read more: IMF agrees to provide Sri Lanka with a $2.9 billion rescue

The country of 22 million people has been unable to pay for food, fuel and other necessities, with a fuel shortage causing daily power outages.

The Chinese official called on commercial creditors, including the International Sovereign Bondholders, to “provide debt treatment in an equally comparable manner, and encourage multilateral creditors to do their utmost to make corresponding contributions.”

“China calls on all other creditors of Sri Lanka, especially multilateral creditors, to take synchronized, similar steps and give effective, strong support to Sri Lanka to help the country emerge from its default status at an early date,” said Mao as she urged the IMF to “take into full consideration the urgency of the situation in Sri Lanka and provide loan support as soon as possible to relieve the country’s liquidity strain.”

“Going forward, China will continue to support relevant financial institutions in actively working out the debt treatment. We will work with relevant countries and international financial institutions to jointly play a positive role in helping Sri Lanka navigate the situation, ease its debt burden and achieve sustainable development,” she added.

Courtesy: Anadolu Agency