President urges China to change tune on debt as IMF visits

Thursday, 25 August 2022 00:28 - - {{hitsCtrl.values.hits}}

Says SL has informed Chinese Government of the need for all creditors to sing from the same hymn sheet

COLOMBO (Nikkei): Sri Lanka is urging China to dramatically change its stance on debt relief, President Ranil Wickremesinghe told Nikkei Asia in an exclusive interview, conceding that reaching a deal will be no simple task.

The appeal to China, the bankrupt Indian Ocean nation’s largest bilateral lender, has emerged as a formidable challenge to Wickremesinghe, who is leading the country’s financial team as it attempts to rebuild an economy starved of foreign reserves and mired in misery.

The effort is likely to feature prominently in a fresh round of discussions between Colombo and International Monetary Fund representatives who arrived yesterday.

“We have informed the Chinese Government (of) the need to restructure (the debt) and the need for all the creditors to sing from the same hymn sheet,” Wickremesinghe told Nikkei.

But the six-time Prime Minister, who won a Parliamentary vote for the Presidency and began his term on 21 July, sees a complex path to spurring a change of heart in Beijing, hinging partly on Sri Lanka’s other lenders.

“China, of course, has adopted a different approach, so it is a question of what is the agreement that the (other creditor) parties can reach with China,” he said during a 40-minute conversation in his wooden-panelled office at the Presidential Secretariat, a colonial-era building that faces Colombo’s seafront.

Wickremesinghe was responding to a question about China’s preferred route of refinancing its loans or deferring the repayment dates for countries in debt to Chinese banks – rather than restructuring the loans and settling for a loss-making “haircut”.

“Sri Lanka will have to convince the Chinese to come on board with a haircut,” said JB Securities Managing Director Murtaza Jafeerjee a financial consultancy in Colombo. “Chinese debt (to Sri Lanka) is in dollars... and it would not be in China’s interest to be a spoiler.”

The list of creditors in the $ 81 billion economy ranges from Western sovereign bondholders, who together account for the largest $ 14 billion slice of debt, to bilateral players such as China, Japan and India. Then there are the multilateral lenders – the Asian Development Bank and the World Bank.