Beijing reaffirms financial support for Colombo

China has said it would continue to support Sri Lanka, as the crisis-hit island nation’s prime minister on Saturday wrapped up a visit to Beijing to try to finalise a debt restructuring deal.

Prime Minister Dinesh Gunawardena arrived in China last Monday for a visit that included meeting President Xi Jinping and an appearance at the Boao Forum, a high-profile international meeting.

Sri Lanka’s years-long economic crisis was high on the agenda during Gunawardena’s trip, with China accounting for around 10% of the South Asian country’s total foreign debt.

China is willing to “continue supporting its financial institutions to actively negotiate with Sri Lanka, maintain friendly communication with other creditors, play a positive role in the International Monetary Fund, assist Sri Lanka in financial relief,” Beijing’s Foreign Ministry said in the Chinese version of a joint bilateral statement.

The two sides agreed to “make every effort to promote the Port City Colombo and Hambantota Development Project, turning them into flagship projects of the Sino-Sri Lankan joint construction of the Belt and Road”, the statement said, referring to Xi’s massive Belt and Road global infrastructure initiative.

The southern sea port of Hambantota was considered among the white-elephant projects launched by former president Mahinda Rajapaksa, who ruled the country for a decade until 2015.

Rajapaksa borrowed heavily from China for projects that many criticised as a debt trap that led to the worst economic crisis in Sri Lanka’s history.

Unable to repay a huge loan taken from China in 2017 to build Hambantota port, Sri Lanka handed it over to the state-owned China Merchants Group for US$1.12 billion on a 99-year lease.

China had agreed “in principle” to restructure Sri Lanka’s debt in December, but neither Colombo nor Beijing had given details and the two are yet to finalise an agreement.