Home » Sri Lanka external debt restructure hangs in a balance due to China factor.

Sri Lanka external debt restructure hangs in a balance due to China factor.

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By: Staff Writer Colombo (LNW): Sri Lanka is in a quandary following the International Monetary Fund’s (IMF) delay in disbursement of the second tranche of US$330 of the $ 3 billion Extended Facility till next month due to inconclusive first review on the progress of economic reform programme. The much-sought after bailout loan of $330 the million by Colombo from the International Monetary Fund (IMF) has not materialized ostensibly after Beijing’s refusal to restructure bilateral loans it extended to the Indian Ocean Island, informed sources said But the Central Bank Governor Nandalal Weerasinghe said that India Paris Club and China debt restructuring negotiations are continuing with “very impressive progress. IMF staff level agreement will also be reached soon following the settlement of ‘few matters including the achievement of some targets as soon as possible, he claimed. But the IMF has been insisting that Sri Lanka should get an assurance from its biggest bilateral lenders – China, Japan and India – that they will restructure their loans before possible IMF funding. Colombo, despite many requests, now finds that Beijing is unwilling to provide it with “a concrete debt relief framework”, says a report in Nikkei Asia. However the government is likely to reach a debt reduction deal this month with India, Japan and France to be in time for the IMF and the World Bank’s meetings later this month in Morocco. China has not joined the group by remaining an observer, official sources said. If China opts out of the deals to provide support to Sri Lanka in managing its external loans, it could cast a shadow over its IMF bailout plans as China holds 42 per cent of the island nation’s external debt. Now the stakes are rising for an expected mid-October visit to China by President Ranil Wickremesinghe to attend a 10th anniversary summit of the Belt and Road Initiative, Beijing’s regionwide infrastructure building program. He is due to meet Chinese President Xi Jinping to discuss debt relief. In its statement on the review, the IMF did not point fingers. But multiple diplomatic sources from Asian and Western missions in Colombo told Nikkei Asia that China’s foot-dragging on Sri Lanka’s debt was an issue. “The other lenders were OK with this arrangement and were prepared to let Colombo deal with Beijing at a bilateral level,” the diplomat added. “But there cannot be any special deals favoring Chinese debt terms, such as no haircuts, yet expecting haircuts from the other countries.” Mr Wickremesinghe – who stepped into the role of president in the middle of last year — has assured bilateral lenders of equal treatment. The incumbent then, Gotabaya Rajapaksa, had fled in the wake of unprecedented street protests driven by public anger over the collapsed economy. Within the group of countries besides China, diplomatic sources familiar with the talks revealed that concrete progress on a blueprint and timeline is still elusive.
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