China stands by Sri Lanka in its hour of need

Shortage of foreign currency, COVID-19 impact and inflation take heavy toll on island nation

China’s willingness to offer assistance within its capacity to help Sri Lanka cope with its difficulties not only reflects the depth of their strategic cooperative partnership, but also showcases efforts for common and sustainable development, according to analysts and officials.

In a phone conversation Premier Li Keqiang had on Friday with Mahinda Rajapaksa, the prime minister of Sri Lanka, Li said China is willing to provide, within its ability, any assistance urgently needed by the country to improve its people’s well-being. Li shared Sri Lanka’s concerns about its current economic hardship and humanitarian needs.

Sirimal Abeyratne, an economics professor at the University of Colombo, said Sri Lanka needs help from multiple parties to deal with its financial crisis.

Due to a shortage of foreign currency after years of shrinking state revenues, the impact of the COVID19 pandemic and rising inflation in recent months, Sri Lanka not only faces economic hardship but also difficulties in importing necessary medicine and fuel, Kelum Shivantha, editor-in-chief of the Sri Lanka Mirror, said earlier.

China has always been a most reliable friend and partner of Sri Lanka, Anuradha Yahampath governor of the country’s Eastern Province, told Chinese Ambassador to Sri Lanka Qi Zhenhong

on Sunday.

Qi briefed the governor on incoming humanitarian assistance donated by China’s central and local governments, as well as poverty-relief and Red Cross organizations. For example, Yunnan province has sent food aid to assist 10,000 poverty-stricken households in eastern Sri Lanka.

Wang Se, an assistant researcher at the China Institutes of Contemporary International Relations’ Institute of South Asian Studies, said that although China faces challenges, its offer of help to Sri Lanka embodies its commitment to acting as a responsible major country and striving for common and sustainable development envisioned by President Xi Jinping’s Global Development Initiative.

Shivantha, from the Sri Lanka Mirror, said it is impressive to see that over the decades, China has assisted Sri Lanka’s economic development in many ways, while Sri Lanka has also assisted China on several occasions.

Answering questions from local media outlets on Monday, Qi said that contrary to some media labeling China as posing a “debt trap” for countries like Sri Lanka, China is neither the only creditor, nor the largest creditor of the island country. And its loans are mainly serving local economic development and infrastructure that are conducive for its getting out of a “development trap”.

The ambassador again stressed that the related departments of both countries are in communication about Sri Lanka’s financing demands.

He noted that between July 2021 and January, China provided 730,000 metric tons of fuel to Ceylon Petroleum Corporation, with payments of $390 million yet to be made.

The Sri Lankan government decided last week to suspend the repayment of all debts for an interim period. Abeyratne from the University of Colombo underlined the difficulties, saying, “Every year we have about $5 billion to $6 billion in foreign debt payment, on the other hand we have also lost tourism income and workers’ remittances.” “So it is not possible to raise funds of that magnitude,” he added.

Sri Lankan Finance Minister Ali Sabry went to Washington last week for talks with the International Monetary Fund and the World Bank.

Anne-Marie Gulde-Wolf, acting director of the IMF’s Asia and Pacific Department, said at an online news conference on Tuesday that, to address its debt problems, Sri Lanka must tighten its monetary policy, raise taxes and adopt flexible exchange rates. “We see a need for flexible exchange rates,” she was quoted by Reuters as saying.

There needs to be trust built between the IMF and Sri Lanka, Abeyratne said, and Sri Lanka also has to depend on the support of friendly countries like China.

Staunch friend

Chinese Foreign Ministry spokesman Wang Wenbin said last week that China has always supported Sri Lanka’s socioeconomic development.

“We will offer support and assistance to the best of our capability to help Sri Lanka reinvigorate its economy and improve people’s livelihoods.”

Wang Se said that the new Cabinet of Sri Lanka continues to face boycotts and protests, while the Sri Lanka Mirror reported that the government faces an upcoming no-confidence motion in the nation’s Parliament.

However, no matter how the world and domestic situations evolve, China will remain a staunch and trustworthy friend of Sri Lanka, Qi, the Chinese ambassador, told reporters.

Over the past two years China has been the greatest contributor to Sri Lanka in its fight against the pandemic, said Shivantha.

Since the start of the pandemic, China has provided 26 million doses of vaccines and other medical materials as well as $2.8 billion in financial assistance since the outbreak of the pandemic, which helped Sri Lanka fight COVID-19, according to Qi. On Sunday, the country registered no new deaths from COVID-19.

Qi Zhenhong