China expresses support to SL in line with IMF program

• Unlike that of India’s and Paris Club’s, China’s financial assurance letter not made public but Daily FT learns biggest bilateral lender to Sri Lanka looks forward to finalise specifics of debt treatment soon

In ensuring a lifeline for Sri Lanka, China has expressed support to the former in line with the International Monetary Fund (IMF) program.

China’s financial assurance dated Monday 6 March, ensured that Sri Lanka was clear of the requirements for the IMF Executive Board to approve the $ 2.9 billion four Extended Fund Facility (EFF) in a fortnight i.e. 20 March.

Though the latest financial assurance from China’s EXIM Bank hasn’t been made public unlike in the case of India and Paris Club, the Daily FT learns that it was to the satisfaction of the IMF.

China is the biggest bilateral lender for Sri Lanka and as per Finance Ministry sources, debt outstanding including unpaid principal for China is $ 4,678 million and separately $ 2,190 million as term financing facilities categorised under commercial debt primarily from CDB. Sri Lanka’s total external debt subject to restructuring is around $ 33 billion.

In its assurance letter signed by EXIM Bank Vice President Zhang Wencai, China had said it extends firm support to Sri Lanka through a debt treatment.



 This would be in line with the goal/objective of restoring public debt sustainability consistent with the envisaged IMF supported program, it added. The letter reiterates China’s extension of a two year moratorium as an immediate measure.

However, Daily FT learns that the letter referred to China’s interest to expedite the negotiation process over the medium to long-term debt treatment and finalise the specifics in the coming months.

China also called on commercial creditors including International Sovereign Bondholders to provide debt treatment in an equally comparable manner and encourage multilateral creditors to their utmost to make corresponding contributions to help Sri Lanka to better respond to the crisis and emerge out of it.

An AFP report filed out of Beijing on Wednesday said China would “play a positive role” in helping bankrupt Sri Lanka get through its debt crisis after agreeing to restructure its loans.

“China is ready to work with relevant countries and international financial institutions to play a positive role in helping Sri Lanka cope with its current difficulties, ease its debt burden and achieve sustainable development,” Foreign Ministry Spokesperson Mao Ning said at a regular briefing.

“The Export-Import Bank of China, as the official bilateral creditor, issued a financial assurance letter to Sri Lanka on March 6,” she said when asked about President Ranil Wickremesinghe’s Tuesday statement that Beijing had agreed to help.

China, Mao added, “supports relevant financial institutions in actively discussing debt disposal plans with the Sri Lankan side”.