ECONOMYNEXT – Sri Lanka is in talks with China over Beijing’s alternative proposal for debt restructuring and the Finance Minister is expected to inform about it in parliament in detail, Cabinet Spokesman Nalaka Godahewa said on Tuesday.

Government sources have said China has disagreed on restructuring its debts amounting over 3 billion US dollars and Sri Lanka has decided for a debt restructuring to save its few dollars to pay for essential imports amid seeking assistance from the International Monetary Fund (IMF).

“Though the West is mostly in the process of extending their help for debt restructuring proposal which has the IMF backing, China has expressed its stance that since it has been lending for many countries around the world, debt restructuring for one country could have an impact on the other countries as well,” Godahewa told a weekly cabinet briefing.

“Instead of debt restructuring, China has said that it is ready lend us another loan to repay its loans.”

“It is on preliminary discussion stage and I hope the Finance Minister will explain this in the parliament in detail.”

Chinese Ambassador Qi Zhenhong on Monday said China did its best to help Sri Lanka not to default but Colombo “went to the IMF and decided to default”.

He also said the discussion for another 2.5 billion loans has been halted temporarily until there is clarity on the debt restructuring from the Ambassador Qi told reporters at a media briefing in Colombo.

Godahewa said Sri Lanka needs around 4-5 billion US dollars for emergency requirement to face the economic crisis, which has now blown into a political crisis with people demanding the resignation of President Gotabaya Rajapaksa and his brother, Prime Minister Mahinda Rajapaksa.

Sri Lanka on April 12 declared that it was suspending the repayment of foreign loans as the country had run out of foreign reserves. Since then the country has been downgraded four times by global rating agencies. (Colombo/April26/2022)