• Says US, China, India, Japan and members of the Paris Club declare support for helping SL
• Acknowledges painful sacrifices by all Lankans to ensure economic stability 

By Charumini de Silva

Cabinet Co-Spokesman and Minister Bandula Gunawardena yesterday clarified that China has only offered a two-year moratorium on debt repayments, despite speculations on the process.

“China has informed the Government-appointed agencies assigned for debt restructuring process that they will extend a two-year moratorium on debt repayment,” he told journalists at the post-Cabinet meeting media briefing yesterday. With $ 7.3 billion, China is Sri Lanka’s biggest bilateral creditor accounting for 52% of the total worth $ 14 billion. On 1 September, International Monetary Fund (IMF) reached a Staff-Level Agreement with Sri Lankan authorities, in a first step before extending a $ 2.9 billion bailout package that the Fund has made contingent on assurances from the country’s creditors. 

The priority for Sri Lanka was to obtain financing assurance from the bilateral creditors.  Acknowledging that foreign diplomatic offices, China and the US have issued statements in this regard the Cabinet Co-Spokesman said all countries had declared their support to help Sri Lanka overcome its worst economic crisis.

“The US, China, India, Japan and members of the Paris Club are all friendly parties and they all like to see Sri Lanka overcome this challenging economic situation,” he added. 

As of the end of 2021, Sri Lanka’s foreign currency bilateral debt was $ 9.6 billion or 11% of GDP as against $ 20 billion held by private creditors. Guaranteed SOE bilateral debt was $ 300 million and those held by the Central Bank of Sri Lanka were $ 1.8 billion. Of the Paris Club members, the giant share is held by Japan (32%) followed by Korea 3%, Germany and France 2%, USA and Spain 1% each. Sri Lanka has received IMF support 16 times in the past. The objectives of the new IMF program are to restore macroeconomic stability and debt sustainability while safeguarding financial stability, protecting the vulnerable, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.

Gunawardena also highlighted that the Government has introduced policy reforms via a tight fiscal policy with a slew of other measures as conditions of the IMF. These include; cost-reflective electricity, fuel, and gas prices, tax reforms, restructuring of State-owned enterprises (SOEs) and restrictions on money printing. 

“I think all Sri Lankans have taken up a painful share of the reforms to ensure economic stability,” he stressed. 

Cabinet reviews progress of 261 large-scale development projects