China will also have to fall in line with SL’s debt restructuring process: CB Governor

As China expressed some qualms over Sri Lanka choosing to restructure its debt with the help of the International Monetary Fund (IMF) instead of refinancing them, Central Bank Governor Dr. Nandalal Weerasinghe said that all creditors would be treated equally and thus, China would also have to fall in line with the process for the benefit of both parties. 

In the following week Sri Lankan authorities met with the IMF officials in Washington, China expressed its disappointment over Sri Lanka’s decision to default and seek to restructure its external debt with the support of the IMF. 

“All the external creditors will be treated equally. We have made it very clear,” said Dr. Weerasinghe in response to a question on China’s remarks.  

“India, China, non-Paris Club, Paris Club, Commercial (creditors) will be treated on the same basis. It is not fair to treat one creditor differently to others. Then the others won’t come onboard,” he added. 
Chinese Ambassador to Sri Lanka Qi Zhenhong on April 25 said Sri Lanka’s decision to seek the IMF assistance slowed the negotiations of Chinese assistance of 
US $ 2.5 billion. 

However, when he called on Finance Minister Ali Sabry at the Finance Ministry this Monday, he reassured China’s unstinted support in resolving the economic crisis while stressing that they support the country’s decision to work with the IMF in restructuring its debt. 

“Ambassador Zhenhong also assured Minister Ali Sabry that as a major shareholder of the IMF, China is willing to play an active role in encouraging the IMF to positively consider Sri Lanka’s position and to reach an agreement as soon as possible,” said a Finance Ministry press communique. 

The Chinese government has been assisting Sri Lanka in numerous ways through term loans, swap lines and potentially new credit lines. Meanwhile, Dr. Weerasinghe said it is in the best interest for both parties—lenders and borrowers—to restructure debt as Sri Lanka doesn’t intend to forgo any debt repayments, instead would restart repayment after some time. “To my knowledge, the best thing for both the lender as well as borrower is to arrive at an agreement on a future settlement date as part of its restructuring,” he said. 

Meanwhile, in reference to a potential deal with the IMF, Dr. Weerasinghe said Sri Lanka doesn’t need to have agreements with all the creditors for the country to obtain assistance from the IMF. He is hopeful that a Staff-level agreement would be possible in two to three months while debt restructuring would happen within a period of six months.