Tue, 03 October 2023
The Daily Ittefaq

Sri Lanka's central bank urges China and India to reduce its debts

Update : 12 Jan 2023, 11:05

Sri Lanka is experiencing a foreign currency debt default and for this the Central Bank of Sri Lanka has urged India and China to agree a write-down of their loans as soon as possible.

"The sooner they give us finance assurances that would be better for both (sides), as a creditor, as a debtor. That will help us to start repaying their obligations, said P. Nandalal Weerasinghe, Governor of the bank while speaking to the BBC on January11.

China and India are Sri Lanka’s biggest bilateral lender. The two countries play a key role in Sri Lanka’s debt restructuring process.

Sri Lanka is facing currently the worst-ever economic crisis since its independence in 1948, defaulted on its debt repayments and negotiated a $2.9 billion bailout.

But the International Monetary Fund (IMF) will not release the funds until India and China first agree to reduce Sri Lanka's billions of dollars of debt.

The bank's Governor said: "We don't want to be in this kind of situation, not meeting the obligations, for too long. That is not good for the country and for us. That's not good for investor confidence in Sri Lanka."

"We engage with private creditors in good faith negotiations. And what we are seeing is that they are very positive and they are willing to engage with us." the Governor told the BBC.

China's lending to Sri Lanka stands at around $7 billion while India is owed around $1 billion.

The Sri Lankan government had initially hoped to agree a new payment plan with China and India by the end of 2022.

US Ambassador to Sri Lanka, Julie Chung told to the BBC that the greater onus to move was on China, as the biggest bilateral lender.

"We hope that they do not delay because Sri Lanka does not have time to delay. They need these assurances immediately. For the sake of the Sri Lankan people, we certainly hope China is not a spoiler as they proceed to attain this IMF agreement," said Julie Chung.

The Governor's remarks came just days after a large group of international economists on January 8 called for Sri Lanka's bonds, to be "cancelled".






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