Excellent progress on debt restructuring with China Development Bank: Finance Secretary

• Now in final stages of finalizing Comparability of Treatment (CoT) matters for CDB relating to Official Creditor Committee

By Kelum Bandara  

Finance Ministry Secretary Mahinda Siriwardana said that ‘excellent progress’ had been made on the debt treatment relating to China Development Bank (CDB, and Sri Lanka is now in the final stages of finalizing Comparability of Treatment (CoT) matters for CDB relating to the OCC (Official Creditor Committee).  

Delivering a speech at the 2024 China Aid Training Alumni Reception on Wednesday, organised by the Chinese Embassy, he said Sri Lanka hopes that the debt treatment chapter will soon be closed, and can resume a robust financial relationship, including fresh financing for high-quality, priority projects.   

“We all know how complex and technically challenging this debt treatment process has been, both in terms of ensuring compatibility with the IMF’s Debt Sustainability Analysis (DSA) as well as ensuring Comparability of Treatment with other creditors. This was possible with Chinese lenders, given the mutual trust and good faith demonstrated by both sides,” he said.   

He said, “It is a well-known fact that Sri Lanka and China have a longstanding friendship that dates back centuries, cultivated through extensive trade along the Maritime Silk Route and cultural exchange. Sri Lanka was the first country in South Asia to recognise the People’s Republic of China diplomatically in January 1950. Over the years, Sri Lanka-China relations strengthened through numerous high-level visits between the two countries.”  

He said China has also played a pivotal role in supporting Sri Lanka’s debt treatment efforts in response to the unprecedented, deep and most complex economic crisis experienced since mid-2021.  

“Exactly a year ago, in October 2023, China was the first among the official sector creditors to announce an Agreement in Principle (AIP) on the key financial terms for the treatment of debts owed by Sri Lanka to Exim Bank of China. Subsequently, following cordial and constructive discussions, the two sides reached a final agreement on debt treatment terms in June 2024, on the same day when a similar MoU was signed with the Official Creditor Committee (OCC) comprising 17 official sector lenders to Sri Lanka and co-chaired by France, India and Japan. Subsequently, following the agreement coming into force, Exim Bank of China became the first external lender to conclude the debt treatment process,” he said.