Sri Lanka seeks debt relief, import credit from China

President Gotabaya Rajapaksa with visiting Foreign Affairs Minister of People’s Republic of China and Member of the State Council, Wang Yi

Sri Lankan President Gotabaya Rajapaksa has sought debt relief and an import credit scheme from China. 

The request was made when President Rajapaksa met with the visiting Foreign Affairs Minister of People’s Republic of China and Member of the State Council, Wang Yi at the Presidential Secretariat yesterday. 

“The President pointed out that it would be a great relief to the country if attention could be paid on restructuring debt repayments as a solution to the economic crisis that has arisen in the face of Covid-19 pandemic,” a statement issued by the President’s Media Division said.

“The President also said that if a concessional trade credit scheme could be initiated for imports from China, it would enable the industries to operate smoothly,” it added. 

Minister Wang Yi extended an invitation to President Rajapaksa to visit China and expressed confidence that the visit would take place in the near future.

Sri Lanka is currently facing its worst economic meltdown since independence amid drying up of foreign exchange inflows from tourism, foreign remittances and direct investments owing to the Covid-19 pandemic. 

The sweeping tax cuts introduced in the latter part of 2019 affected government revenue significantly, widening the already high budget deficit, while the hurriedly introduced organic fertiliser policy has threatened the country’s food security.

China has lent heavily to Sri Lanka largely for infrastructure development, and as at end-2020 the central government had borrowed about US$ 3.5 billion from China, not counting loans to State-run entities.