Daily Management Review

Faced With Economic Crisis, Sri Lanka Requests China To Restructure Its Debt


Faced With Economic Crisis, Sri Lanka Requests China To Restructure Its Debt
The Asian island country Sri Lanka is currently facing an acute economic crisis. The President of the country has requested China to restructure its debt repayments so that this South Asian country is able to combat its financial crisis which is worsening.
The proposal was made by Gotabaya Rajapaksa during a meeting with Chinese Foreign Minister Wang Yi on Sunday.
Over the previous decade, China has provided Sri Lanka with more than $5 billion for infrastructure projects such as roads, airports, and ports.
However, critics claim that the funds were spent on ineffective initiatives with little returns.
"The president pointed out that it would be a great relief to the country if attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the Covid-19 pandemic," Rajapaksa's office said.
China was also requested to provide "concessional" conditions for its exports to Sri Lanka, which totaled roughly $3.5 billion last year, according to the statement, but no further details were provided.
Rajapaksa further stated that Chinese visitors will be allowed to return to Sri Lanka if they followed tight coronavirus laws.
Sri Lanka's largest supplier of tourists before the pandemic was China, and it imports more commodities from China than any other country.
Sri Lanka has been mired in a severe financial and foreign exchange crisis in recent months, exacerbated by the loss of tourist revenue during the outbreak.
After international financial markets, the Asian Development Bank, and Japan, China is Sri Lanka's fourth largest lender.
China has provided the country with billions of dollars in soft loans, but the island nation has been embroiled in a foreign exchange turmoil, which some analysts believe has brought it to the brink of default.
Sri Lanka has $4.5 billion in debt that has to be repaid within this year, beginning with a $500 million international sovereign bond that is set to mature on January 18th.
The central bank of the country has informed investors that all of the government's debt repayments will be made, and that money for bond repayment slated for this month has already been allocated.
Sri Lanka is an important part of China's Belt and Road Initiative, a long-term strategy to fund and construct infrastructure that connects China and the rest of the world.
Some countries, including the United States, have called the project a "debt trap" for weaker and poorer countries.
Beijing has long denied the charges, accusing individuals in the West of spreading the storey in order to smear its image.
A Sri Lankan government minister said last month that the country planned to pay off a debt for past oil imports from Iran with tea.
It intends to send $5 million in tea to Iran each month to pay off a $251 million debt.
Sri Lanka announced an economic crisis in September after a sharp drop in the value of its currency, the rupee, resulted in a rise in food costs.
Authorities announced that they will seize control of vital food supplies, such as rice and sugar, and set prices in an effort to rein in growing inflation.