Sri Lanka has requested China to facilitate a credit line of up to USD $ 1.5 billion and a separate loan of USD $ 1 billion totalling USD $2.5 billion, as the island nation grapples with the worst economic crisis in decades.
Qi Zhenhong, Chinese ambassador to Sri Lanka told reporters the two sides were in discussion for the loan arrangements. He added, that the China Development Bank had offered a loan of USD $500 million to the Island nation on March 18.
Last week India extended a USD $ 1 billion credit line to facilitate the purchase of essential imports.
Sri Lanka has to repay at least USD $ 4 billion worth of debt this year, including a USD $ 1 billion international sovereign bond maturing in July. The reserves have been dropping drastically as the country struggles to finance imports and meet debt repayments.
Senior economist Shihar Aneez reported to Newswire that Sri Lanka was scheduled to pay USD $ 53.596 million to the China Development Bank, US$ 17 million to the National Water Board, and US$ 386.19 million Yuan to the China Exim Bank.
He said the payments were due between 18-21 March 2022 and these payments are yet to be settled by the Sri Lankan Government.
Forex reserves dropped to USD $2.31 billion at the end of February, down around 70% from two years ago. The inability to finance imports has led to shortages in fuel, medicine and food. Powercuts have become routine across the island due to the lack of fuel for power generation.
Over the last decade China has lent Sri Lanka more than $5 billion for the construction of highways, ports, an airport and a coal power plant. But critics say the funds were used for white elephant projects with low returns, which China has denied.
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President Gotabaya Rajapaksa asked China to help restructure debt repayments when he met Chinese Foreign Minister Wang Yi in January, but China is yet to respond to the request.
Last week Rajapaksa said Sri Lanka would work with the International Monetary Fund (IMF). The announcement was another U turn in government policy, for months top government officials had slammed any notion of working with the IMF.
New financial requests including loan facility and buyer’s credit have been raised by Sri Lanka to Chinese government recently. We understand the urgent need of Sri Lanka and its people. Relevant authorities in China are promptly studying the request.
— Chinese Embassy in Sri Lanka (@ChinaEmbSL) March 21, 2022
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