Sri Lanka appeals to China to ease debt burden amid economic crisis | Sri Lanka

Cash-strapped Sri Lanka has sought to reschedule China’s huge debt burden in talks with visiting Foreign Minister Wang Yi, the president’s office said.

“The president stressed that it would be a great relief if debt payments could be rescheduled due to the economic crisis following the pandemic,” President Gotabaya Rajapaksa’s office said in a statement on Sunday.

China is Sri Lanka’s largest bilateral lender and Wang’s visit comes after a warning from international rating agencies that the Rajapaksa government could be on the verge of default.

The island’s tourism-dependent economy has been hit by the pandemic and its depleted foreign exchange reserves have resulted in food rationing in supermarkets and shortages of essentials.

The Chinese Embassy in Colombo did not immediately comment.

Sri Lanka’s foreign exchange reserves fell to just $ 1.5 billion by the end of November – enough to pay only about a month’s worth of imports.

The island’s main energy supplier began rationing electricity on Friday after running out of foreign currency to import oil for its thermal generators.

China accounted for about 10% of Sri Lanka’s $ 35 billion external debt until April 2021, according to government data. Officials said China’s total loans could be much higher if you factor in loans to state-owned enterprises and the central bank.

Sri Lanka has borrowed heavily from China for its infrastructure, some of which has turned into white elephants. Unable to repay a $ 1.4 billion loan to build a port in southern Sri Lanka, Colombo was forced to lease the facility to a Chinese company for 99 years in 2017.

The United States and India have warned that the Port of Hambantota, located along vital east-west international shipping routes, could give China military hold in the Indian Ocean. Colombo and Beijing have denied that Sri Lankan ports are used for military purposes.

Wang arrived in Sri Lanka on Saturday evening after visiting neighboring Maldives, on the final leg of his first overseas tour of 2022 which also took him to Eritrea, Kenya and the Comoros.

China has offered the Maldives infrastructure maintenance, medical aid and visa concessions as Beijing struggles to strengthen ties with the strategically placed archipelago.

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