China silent on Sri Lanka’s request for debt waiver

China once again kept mum on Sri Lanka’s request for debt restructuring but said it has been assisting the island nation to the best of its ability to overcome its forex crisis.

Sri Lanka, which has emerged as a key foothold for China in the Indian Ocean region, is currently reeling under a severe foreign exchange crisis with falling reserves and the government is unable to foot the bill for essential imports.

China once again kept mum on Sri Lanka’s request for debt restructuring but said it has been assisting the island nation to the best of its ability to overcome its forex crisis.

Sri Lanka, which has emerged as a key foothold for China in the Indian Ocean region, is currently reeling under a severe foreign exchange crisis with falling reserves and the government is unable to foot the bill for essential imports.

Last December, Sri Lankan President Gotabaya Rajapaksa requested Beijing’s assistance in mitigating his country’s deepening forex crisis and spiralling external debt.

Gotabaya in his meeting with the Chinese Foreign Minister Wang Yi raised Sri Lanka’s deepening forex crisis and spiralling external debt and sought Beijing’s assistance.

Gotabaya pointed out that it would be a great relief to Sri Lanka if attention could be paid to restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the COVID-19 pandemic.

It is estimated that Sri Lanka owes debt payments to China in the region of USD 1.5 to 2 billion this year. Overall China’s loans and investments in Sri Lanka were estimated to be more than USD eight billion in the last few years.

But Beijing has not made a public commitment for debt relief assistance to Sri Lanka so far.

Asked about Sri Lanka’s pending request for debt relief, Chinese Foreign Ministry spokesman Zhao Lijian told a media briefing here on Wednesday that China has been providing assistance for Sri Lanka’s socio-economic development as its capability allows, and will continue to do so going forward .

With the efforts and solidarity of the Sri Lankan government and people, the country is believed to overcome the temporary difficulties soon and embrace even greater development, he said.

The island nation currently faced a dire economic situation as it struggled to repay the expensive loans.

China is yet to give any firm commitment to last month’s request by the Sri Lankan President Gotabaya for Beijing’s assistance in mitigating his country’s deepening economic crisis, including petrol and diesel shortages.

China’s takeover of the Hambantota port on 99 years lease for a USD 1.2 billion debt swap drew international concerns over Beijing acquiring strategic assets far away from home by providing heavy loans and investment to smaller nations.

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The Hambantota port together with Colombo port city project where China is building a new city with reclaimed land in the sea was viewed with concern, especially in India as Beijing solidified its footing in Sri Lanka, strategically located in the Indian Ocean.

The International Monetary Fund has said that the Sri Lankan economy was facing “mounting challenges” with public debt reaching “unsustainable levels”, and called for urgent reforms in the island nation’s economy as it is facing the worst economic crisis.

(source:Press Trust of India)