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Chinese Ambassador to Sri Lanka Qi Zhenhong
By Shailendree Wickrama Adittiya
China is closely watching ongoing discussions between Sri Lanka and the International Monetary Fund (IMF), Chinese Ambassador to Sri Lanka Qi Zhenhong said, adding that they would have an unavoidable impact on discussions between Sri Lanka and China on financial assistance of $ 2.5 billion.
At a discussion held yesterday on the current situation in Sri Lanka and assistance from China, the Chinese Ambassador said the two countries are currently looking at financial assistance in the form of a $ 1 billion loan and a $ 1.5 billion line of credit.
“To be very frank, the decision that Sri Lanka goes to the IMF on short notice has unavoidably had some impact on the current discussions on this. But still, the financial departments and the institutes from both countries are continuing the discussion on this matter. In my personal opinion, I believe there is much more potential for what we can do between our two countries,” he said.
China has already extended $ 2.8 billion in the form of a term facility of $ 1 billion, assistance of $ 300 million, and a swap of $ 1.5 billion, with a recent announcement from the Chinese Government to provide emergency assistance of 200 million Chinese yen, which includes rice, drugs and other essential products. There has also been support through various other channels.
According to Zhenhong, PetroChina has provided 19 ships of diesel and petrol, totalling 730,000 metric tonnes of fuel, to the Ceylon Petroleum Corporation (CPC) between July 2021 and January 2022. The total cost is close to $ 500 million, with Sri Lanka having paid for only seven ships so far.
The outstanding amount is $ 390 million.
According to Zhenhong, China’s assistance in the form of loans and financial support would help Sri Lanka overcome current difficulties, but China could also make a significant contribution to Sri Lanka in the long term.
Focus was also drawn to resuming negotiations of a free trade agreement (FTA) between the two countries, with the Chinese Ambassador saying: “We believe that the FTA will be very helpful to Sri Lanka to overcome the current difficulties and to achieve long-term development in the future.”
He said the FTA will benefit some sectors or industries more than others and added: “If it is in general helpful to Sri Lanka, Sri Lanka should make a decision.”
“Our basic idea is that the two countries should finalise the agreement under a mutual beneficial principle as early as possible, but the negotiation is definitely not only dependent on one side, so we want both sides to work together,” Zhenhong said, adding that this would be the seventh round of discussions.
He explained that the situation in Sri Lanka changed very fast, impacting internal Government processes. This was unavoidable as well as regrettable, he added.
“But we see that in recent weeks there is some positive response from Sri Lanka’s side and as far as we have learnt, the Secretary to the Prime Minister has already been nominated as chief negotiator and he has conducted several rounds of discussions with the chambers and some internal departments,” Zhenhong said. He was hopeful the discussions would resume.
In terms of Sri Lanka’s ongoing discussions with the IMF, China will be watching the negotiations very carefully and closely and the Chinese Ambassador repeatedly highlighted concerns regarding debt restructuring.
“Debt restructuring is a very important part in the negotiations between Sri Lanka and the IMF. Let us wait and see how the negotiations will be concluded,” he said. Zhenhong added that all countries that received IMF support in the past had to implement strict restrictions on loans and other financial structures.
However, he said that at this point, it was not possible to comment on the impact of such regulations on loans Sri Lanka has taken from China.
Despite this, the Chinese Ambassador gave assurance that China will continue support when Sri Lanka is in urgent need. This would include investments that will help Sri Lanka out of current difficulties. “The important issue is that we need to help Sri Lanka to increase its own ability for self-development,” he added.
Zhenhong stressed that the cooperation between the two countries should be mutually beneficial, with Chinese investors and companies giving Sri Lanka a helping hand in achieving desired development while also making a reasonable profit.
However, he explained that the only concern and request from China was the need for an independent, transparent and fair business environment for all foreign investors. Projects getting suspected due to external reasons after studies have been conducted and negotiations have been held heavily damages confidence in the country as well as Sri Lanka’s business image, Zhenhong explained.
Consistent policy was also necessary, Zhenhong said, adding: “The economic issues should not be politicised. That is a basic concern.”
When questioned about the protests currently ongoing across the island against the Government, the Chinese Ambassador said he was of the opinion that the protests were a direct response to shortages of fuel, electricity, food, etc. He added that the protests reflected the anger and dissatisfaction felt by the people.
However, he said the protest cannot be the final solution to the crisis.
Saying the country’s political situation was very complicated, Zhenhong showed confidence in all parties arriving at a consensus to find solutions and achieve political stability and economic development.
According to the Chinese Ambassador, a common request from various groups, including independent, ruling and opposition groups, that met him was support from China. “They also give the very strong impression that the relations and friendship between China and Sri Lanka is a consensus by the different political parties and the different ethnic groups. They have a consensus.”
Recalling a recent meeting with Opposition Leader Sajith Premadasa, Zhenhong said the Opposition Leader wanted to change the mindset and political culture in the country and become a very constructive Opposition leader. “Under current difficulties, he encouraged China and requested China to give more support to the country,” the Chinese Ambassador said.
He stressed that China was a friend to Sri Lanka regardless of those in power and had always provided aid not to a particular party or government but the people and the country. Zhenhong said they sincerely hoped that all parties and communities in Sri Lanka would unite to overcome the current crisis. Solutions cannot be found overnight, however, as the current crisis has a long history.
He also said all countries, if they have the ability, should come forward to help Sri Lanka. This was especially applicable to developed countries and western nations, as well as countries that colonised Sri Lanka in the past. “They have the obligation, they have more responsibility to come out and help Sri Lanka at this moment,” he said.
China is of the belief that there must be heavy investment in infrastructure if a country wants to attract foreign investors and achieve development goals. According to Zhenhong, the loans and financial support from China has been mainly utilised in development and infrastructure.
While saying this is important and helpful to the economy of Sri Lanka, the Chinese Ambassador explained that: “It is an international practice that it is the responsibility of the borrower to make a decision and decide how much they should borrow and how they should use the loans they borrowed from foreign countries.”
He added it is not an obligation of the lenders. This was in response to questions raised about projects like the Lotus Tower.
Using the Hambantota International Port and Industrial Park as an example, Zhenhong said: “Last year, although the pandemic was very heavy in the country, the total volume of the port almost doubled. So, it is a huge development.”
He added that despite an import ban on vehicles imposed by the Sri Lanka Government, a total of 500,000 vehicle units were transferred through the Hambantota International Port last year. “We believe the Hambantota Port and Industrial Park will be an engine for Sri Lanka’s economy to overcome the current crisis and to take off at high speeds in the future,” Zhenhong added.
