China promises Sri Lanka deal on debt treatment in coming months

 

The Export-Import Bank of China has told Sri Lanka it will try to finalise in the months ahead how it treats debt owed by the crisis-hit nation, according to a letter seen by Reuters which also reiterated a moratorium for debt due in 2022 and 2023.

The International Monetary Fund said on Tuesday that Sri Lanka had secured financing assurances from China, India and all its major bilateral creditors, setting the stage for final approval of the IMF’s $2.9 billion, four-year bailout for the island nation on March 20.

Sri Lanka is facing its worst economic crisis in more than seven decades and a shortage of dollars has disrupted imports of essentials, though the situation has improved this year from last year when protesters ousted its president.

China has extended its “firm support to Sri Lanka through a debt treatment”, EXIM Bank wrote in the letter to the Sri Lankan government on March 6.

The bank’s Vice President, Zhang Wencai, said in the letter that the island nation would not have to immediately repay the principal and interest due on its loans for the two years, “so as to help relieve your short-term debt repayment pressure”.