Beijing confirms offer to Colombo of debt

beijing: China’s government on Friday confirmed it is offering Sri Lanka a two-year moratorium on loan repayments as the Indian Ocean island nation struggles to restructure $51 billion in foreign debt that pushed it into a financial crisis.

China lent to Sri Lanka as part of Beijing’s multibillion-dollar Belt and Road Initiative to increase trade by building ports and other infrastructure across Asia and Africa. The International Monetary Fund offered a $2.9 billion emergency loan but wants other creditors to cut debts, which Beijing had resisted, possibly for fear other borrowers would want the same relief.

China presented a plan to “provide an extension on debt service due in 2022 and 2023,” said a foreign ministry spokeswoman, Mao Ning. “During that period, Sri Lanka would not have to pay the principal and interest due on bank loans.”

China is Sri Lanka’s third-biggest creditor ater Japan and the Asian Development Bank, accounting for about 10% of its debt. But its lack of agreement blocked a final setlement.

Sri Lanka used Chinese loans to build an airport and other projects that failed to pay for themselves.

India, which China sees as a strategic rival, announced last month it gave the IMF assurances to facilitate a bailout plan. India has given Sri Lanka $4.4 billion in emergency credit.

Sri Lanka ran out of foreign currency last April, leading to food shortages, power cuts and protests that forced a prime minister to resign and a president to flee the country. Debt repayment to China, Japan and other foreign lenders was suspended.