Sri Lanka Hopes China Will Come On Board With External Debt Restructuring

Sri Lanka hopes that China will assist the country in its bid to restructure the external debt in the ongoing negotiations, Foreign Minister Ali Sabry said here on Monday.
    
Sabry said negotiations have been progressing well with the Chinese as they are believed to hold over 50 per cent of Sri Lanka’s external debt. 
     
“We have had several rounds of discussions with them,” Sabry, who was in China last week, said.
     
He said the Chinese were taking part as observers in the platform created by the Paris Club of Creditors along with India and Japan.
     
“We are very confident that China will assist us in debt restructuring," Sabry said.
     
Sri Lanka hopes to restructure its external debt of USD 41 billion along with its slightly higher domestic debt of USD 42 billion.
     
On Saturday, the government got its local debt restructuring plan approved in Parliament.
     
Both the restructuring processes should be complete by September in time for the International Monetary Fund’s first review of its USD 2.9 billion bailout programme extended in mid-March.
     
Sri Lanka approached the IMF for a bailout in April 2022 after declaring its first-ever debt default since independence in 1948. 
     
Domestic debt restructuring (DDR) is a key condition in the IMF programme, through which a bailout package was approved for Sri Lanka.
     
The IMF programme unlocks more help from international funding agencies. Accordingly, the World Bank, earlier this week, approved USD 700 million in financing as budgetary and welfare support for Sri Lanka, which is facing its worst economic crisis.
     
The island nation is facing its worst economic crisis in history due to a shortage of foreign exchange reserves.
     
Sri Lanka's economy has been hit hard by the pandemic, rising energy prices, populist tax cuts and double-digit inflation.
     
A shortage of medicines, fuel and other essentials also helped to push the cost of living to record highs, triggering nationwide protests which overthrew the government of President Gotabaya Rajapaksa in 2022.