China has offered “a few hundred million dollars” in loans to Sri Lanka to help ease a shortage of essential goods in the crisis-hit country, according to the island’s prime minister.
Ranil Wickremesinghe, who was appointed Sri Lanka’s prime minister this month, said he hoped to finalize the Chinese loan as his government seeks emergency aid to sustain its economy as it negotiates an IMF bailout . He added that talks with Beijing over additional loans were still in their early stages.
“It’s quite substantial. It would be a few hundred million dollars,” he told the Financial Times in an interview. “It will still help us get essential consumer goods, fertilizers. . . The Department of Finance is having discussions on certain points.
Sri Lanka last week became the first country in Asia to default on its external debt in more than two decades after depleting its foreign exchange reserves, leading to widespread shortages of essential goods, including fuel, medicine and supplies. the food.
Sri Lanka owes more than $50 billion in foreign debt, the largest share to private bondholders, followed by multilateral lenders and countries like Japan, China and India.
Sri Lanka’s ties with Beijing, particularly its participation in the Belt and Road infrastructure project, have been a source of friction with neighboring India, which views its rival’s activity on the island as a threat to national security.
Since joining the government of embattled President Gotabaya Rajapaksa, Wickremesinghe has sought to smooth Sri Lanka’s relations with its allies in order to secure additional funding. Sri Lanka is asking for up to $4 billion from the IMF, and Wickremesinghe said he hoped a deal could be reached as early as next month.
Wickremesinghe dismissed concerns that additional Chinese funding could complicate relations with India, which has been Sri Lanka’s biggest benefactor so far this year with credit lines, swaps and other aid equivalent over $3 billion.
But he added that aid from India would be “not [continue] beyond a point” and Sri Lanka should seek more funding from Japan and China.
“With India, we have had a special relationship and as long as we do nothing to harm India’s national security, we can get along,” he said.
The Sri Lankan government this year asked China to renegotiate its existing debts, which total around $3.5 billion. But Beijing has so far refused and instead offered to provide additional aid and loans.
The state of Sri Lanka’s debts to China is being watched closely by policymakers and analysts, who say Beijing has been reluctant to accept losses on its loans to other Belt and Road participants. Road”, like Zambia.
Wickremesinghe, who also took over as finance minister on Wednesday after the post was vacant for more than two weeks, said he would not approach Beijing and other creditors, including private bondholders, for restructuring talks only after an agreement with the IMF has been reached.
But he said it was too early to know whether Sri Lanka could expect China to accept equal treatment with other creditors, including private bondholders. “We may not have that bargaining power,” he said. “Among countries, we must at least treat everyone the same.”
Securing IMF financing will likely require politically controversial reforms such as cutting public spending and privatizing state-owned enterprises. But Wickremesinghe, who is his party’s only MP, dismissed concerns that he lacked the support to carry out such a process.
“I have been asked to step in and resolve the crisis,” he said, adding that the Sri Lankan parliament must “first understand how deep the crisis is and then how we will get out of it.” .
“Choosing a prime minister in a crisis is quite different from choosing a prime minister in an election.”