China indicates its willingness to support SL debt restructuring

• China is expected to hand over its letter of support for financing and debt restructuring of Sri Lanka, to the International Monetary Fund (IMF) on Sunday

China has indicated its willingness to support the debt restructuring plan for Sri Lanka, a move that will bring the nation closer to the $2.9 billion loan from the International Monetary Fund, Bloomberg reported yesterday.   

The Hindustan Times also reported yesterday that China is expected to hand over its letter of support for financing and debt restructuring of Sri Lanka, to the International Monetary Fund (IMF) on Sunday,   

On Monday, India became the first country to hand-over its letter of support for financing and debt restructuring of Sri Lanka to the International Monetary Fund in a sign of its continued support for the island nation’s economic recovery. In 2022, India provided $4.5 billion in assistance to Colombo to tide over its dire economic situation, the Hindustan Times further said.   While China was expected to hand over its letter of support to IMF on Sunday, New Delhi handed over its support letter to IMF on January 16, four days before External Affairs Minister S Jaishankar landed in Colombo to meet Sri Lanka’s political leadership on January 20, Hindustan Times said. During his meetings with Sri Lankan leaders including President Ranil Wickremesinghe, Jaishankar made it clear that India stands with its neighbour at a time of need and is prepared to go the extra mile if the need arises. The minister said his visit to Sri Lanka was a demonstration of Prime Minister Narendra Modi’s neighbourhood-first policy, the HT story added.   

In the letter of support to IMF, addressed to IMF Managing Director Ms. Kristalina Georgieva, India’s finance ministry acknowledged Sri Lanka’s deeply unsustainable debt situation, the country’s engagement with creditors to restore debt sustainability, and confirmed its strong support to Colombo’s prospective extended finance facility supported programme. New Delhi has made it clear that it is committed to supporting Sri Lanka with financing/debt relief consistent with restoring that country’s public debt sustainability under the IMF supported program and ensuring that the programme is fully financed as projected by the Bretton Woods Institution. The Modi government has conveyed that this financing/debt relief will be provided by the Export Import Bank of India.   

Despite the fact that Sri Lanka’s economic crisis is partly due to white elephant infrastructure port and airport projects financed by high interest loans from Chinese banks, India has come out first in supporting Colombo, which is battling both economic and political turmoil.   

In its letter to IMF, India has conveyed that it is committed to continuing negotiations with the Sri Lankan government along with the Paris Club.