According to data from Sri Lanka’s Department of External Resources, China only accounts for about 10 percent of Sri Lanka’s USD35 billion foreign debt as of April 2021.
Colombo Port City. Image courtesy of NewsIn.Asia.
China has plans to revise schedules for the repayment of loans given to Sri Lanka, in response to the request made by the Lankan President Gotabaya Rajapaksa during his meeting with the visiting Chinese Foreign Minister Wang Yi here on January 9, the Global Times said.
The Communist Party-run Global Times quoted Song Wei, a research fellow at the Chinese Academy of International Trade and Economic Cooperation, as saying that the interest-free loans offered by the Chinese government are applicable for debt relief while the concessional loans raised through the market cannot be written off.
“It is likely that China may exempt part of the interest-free loans to Sri Lanka. And for preference loans that are not eligible for debt relief, China may work with Sri Lanka through negotiations, equity cooperation and rescheduling,” Song said.
China will actively respond to Sri Lanka’s request like what it did to African countries, Chinese observers added. After the outbreak of the COVID-19 pandemic, China announced the cancellation of 15 African countries’ debt in the form of interest-free government loans that were due to mature by the end of 2020, Global Times said.
According to data from Sri Lanka’s Department of External Resources, China only accounts for about 10% of Sri Lanka’s U$35 billion foreign debt as of April 2021. Japan also accounted for about 10% of Sri Lanka’s foreign debt.
Long Xingchun, a senior research fellow at the Academy of Regional and Global Governance of the Beijing Foreign Studies University, said that only restructuring loans with China is not enough to help the island nation tide over its difficulty, which needs a package plan with other involved parties.
“Sri Lanka’s crisis is also a test to countries like Japan, India and the US on how much help they would offer, but what we see now is that they are standing by and even defaming China which is truly helping the country,” Long said.
The island nation is gripped by one of the worst economic crises, and several credit rating agencies including Moody’s and Fitch downgraded its credit rating from B to C.
Global Times noted that some foreign media mentioned nothing about other involved parties’ responsibility but claimed that Sri Lanka’s economic crisis was partly due to “Beijing-financed projects that don’t generate revenue.”
Many infrastructure projects China and Sri Lanka worked together on, including ports and highways, require large amounts of investments and a long construction period, which shows returns of up to 20 to 30 years. Hyping their returns when the projects just started was unprofessional and had ulterior motives.
During a meeting with Sri Lankan President Gotabaya Rajapaksa in Colombo on Sunday, Foreign Minister Wang Yi called on China and Sri Lanka to discuss the restart of talks on free trade agreement by tapping the opportunities of the Regional Comprehensive Economic Partnership (RCEP) agreement and China’s vast market. Wang said the Colombo Port City and Hambantota Port projects could be engines for pushing forward bilateral cooperation.
This article by P.K.Balachandran appeared in NewsIn.Asia on 12 January 2022. Balachandran is a senior Indian journalist based in Colombo and has been writing on South Asian issues for over 20 years.
