President Gotabaya raises debt crisis with Chinese FM
Sri Lankan President Gotabaya Rajapaksa on Sunday discussed with Chinese Foreign Minister Wang Yi if Beijing could help his country to overcome the forex crisis by rescheduling its external debt.
He raised the issue when Wang, who arrived here on Saturday from the Maldives on a two-day visit, called on him at the Presidential Secretariat here.
President Rajapaksa pointed out that it would be a great relief to Sri Lanka if the attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of COVID-19 pandemic, according to a statement issued by the President’s Office. It is estimated that Sri Lanka owes debt payments to China in the region of $1.5 to 2 billion this year. The international rating agencies have expressed doubts over the island nation’s ability to meet its international sovereign bond payments of $1500 million, the first $500 million of which falls next week for payment.
The Lankan President also said that if a concessional trade credit scheme could be obtained for imports from China, it would enable industries to run smoothly.
Wang’s visit is taking place at a time when Sri Lanka is facing its alltime worst foreign exchange crisis. By December, the reserves position had plummeted to just one month’s imports or a little over $1 billion. However, by the end of the year, the Central Bank announced that the reserves position had improved and the cash realisation was believed to have come from a previously agreed currency swap with China.
In recent months, the public has experienced a shortage of many essentials due to the foreign exchange crisis. Import restrictions to save dollars have threatened cooking gas and fuel supplies in addition to the looming power cuts. With the realisation of a currency swap from China the reserves topped $3 billion by the end of last year. China is one of the biggest investors in various infrastructure projects in Sri Lanka. But there has been criticism, both locally and internationally, and growing concerns that China has lured Sri Lanka into a debt trap.
The previous Maithripala Sirisena government handed over Hambantota port to a state-run Chinese firm in 2017 for a 99 years’ lease as a debt swap amounting to $1.2 billion.
Earlier, the Chinese Foreign Minister Wang Yi first met the senior of the Rajapaksa brothers - Prime Minister Mahinda Rajapaksa and discussed a host of issues, including investments, promoting tourism and the fight against the COVID-19 pandemic as the two countries marked the 65th anniversary of diplomatic ties.