According to a letter, the Export-Import Bank of China has offered Sri Lanka a two-year debt moratorium and stated that it will help the country in its pursuit of a $2.9 billion loan from the International Monetary Fund.
India promised to provide Sri Lanka with money and debt relief in a letter to the IMF earlier this month, but the island nation also needed China’s support to strike a final deal with the international lender.
China’s letter to the finance ministry on January 19 may not be sufficient for Sri Lanka to quickly receive the IMF’s clearance for the crucial loan, according to a Sri Lankan source with knowledge of the situation.
rivals in the region The largest bilateral lenders to Sri Lanka, a nation of 22 million people, which is going through its worst financial downturn in seven decades, are China and India.
In response to Sri Lanka’s request, the Export-Import Bank of China reportedly stated in the letter that it would grant an extend on the debt service due in 2022 and 2023 as an urgent contingency measure.
According to an IMF study published in March of last year, China EXIM bank has lent Sri Lanka $2.83 billion by the end of 2020, or 3.5% of the island’s debt.
During the time period specified above, you are exempt from repaying the principal and interest owed on the bank’s loans, according to the letter.
During this window time, we would want to speed the negotiating process with your side regarding the treatment of medium- and long-term debt.
According to estimations by the China Africa Research Initiative, Sri Lanka owed Chinese lenders $7.4 billion by the end of last year, or over a quarter of its total public external debt.
To assist in easing the liquidity crunch, the bank will support Sri Lanka in its request for the IMF Extended Fund Facility (EFF) stated the letter.
Due to the sensitivity of the private conversations, the Sri Lankan insider preferred to remain anonymous. He or she stated that the island nation had hoped for Beijing to provide an unambiguous guarantee similar to what India did for the IMF.
This is significantly less than what is needed and expected of China, the source said, who was expected to do more.
The foreign and finance ministries of Sri Lanka as well as the foreign ministries of China did not immediately react to Reuters’ inquiries.
P. Nandalal Weerasinghe, the head of Sri Lanka’s central bank, stated on Tuesday that the nation anticipated for assurances from China and Japan, another significant bilateral lender, shortly and hoped for a successful debt restructuring within 6 months.
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