Sri Lanka’s Wickremesinghe requests China for debt restructuring

Amid economic turmoil, Sri Lankan President Ranil Wickremesinghe urged China on Thursday to restructure its debt as Beijing is Colombo’s largest bilateral lender.

“We have informed the Chinese Government of the need to restructure the debt and the need for all the creditors to ‘sing from the same hymn sheet’,” Wickremesinghe told Nikkei Asia in an interview. The appeal to China, Sri Lanka’s largest bilateral lender, has emerged as a formidable challenge to Wickremesinghe, who is leading the country’s financial team as it attempts to rebuild an economy starved of foreign reserves and mired in misery, reported a Sri Lankan publication, The Morning.

Responding to a question about China’s preferred route of refinancing its loans or deferring the repayment dates for countries in debt to Chinese banks – rather than restructuring the loans and settling for a loss-making “haircut”, Wickremesinghe told Nikkei Asia at the Presidential Secretariat, “China, of course, has adopted a different approach, so it is a question of what is the agreement that the other creditor parties can reach with China.”

Meanwhile, Wickremesinghe also conceded that reaching International Monetary Fund (IMF) deal will be no simple task, reported The Morning.

An International Monetary Fund (IMF) statement on the eve of its visit highlighted, albeit obliquely, that the China factor is set to shape Sri Lanka’s economic fortunes.

On the prospects of giving Sri Lanka a multibillion-dollar bailout, the fund said, “Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the Extended Fund Facility programme would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored.”

The Washington-based fund’s team will be in Colombo until the end of this month and called on Wickremesinghe on Thursday to discuss the current situation of the economic crisis the nation is grappling with at present, reported The Morning.

During the meeting with President Wickremesinghe, the IMF delegates decided to hold further discussions with Central Bank of Sri Lanka (CBSL) officials on technical issues, the President’s Media Division (PMD) said.

IMF Monetary and Capital Market Department Debt Capital Markets Division Chief Peter Breuer, Secretary to the President Saman Ekanayake, President’s Chief of Staff Sagala Ratnayake, and CBSL Governor Dr Nanadalal Weerasinghe also joined the discussion, reported The Morning.

The meeting with the Head of State came after the delegates of the global lender kicked off discussions with Dr Weerasinghe in the morning, to finalise a staff-level agreement for a possible USD 3 billion bailout package, including restructuring debt of about USD 29 billion.

IMF’s Resident Representative for Sri Lanka Tubagus Feridhanusetyawan and Finance Secretary Mahinda Siriwardana also participated in the talks at the Central Bank premises.

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