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Sri Lanka holds second round of talks on debt restructuring as China remains aloof

Sri Lankan President Ranil Wickremesinghe's challenges continue on the economic front

Sri Lankan state minister of finance Shehan Semasinghe told local media that the country is holding the second round of talks with its bilateral creditors. The island nation’s main bilateral creditors are China, Japan and India.

The country also is holding talks with the World Bank and the International Monetary Fund (IMF) for a bail-out loan which would be possible once the debt-restructuring talks with bilateral donors are successful.

Of the three bilateral donors, China has not responded to Colombo’s requests for debt restructuring. China’s inflexibility would mean that the IMF too will not issue the bail-out funds as sought by Colombo. Sri Lankan officials have visited Washington twice this year to attend the spring meetings and the annual meetings of the World Bank to seek a $2.9 billion rescue package.

Semasinghe told Sri Lankan media that the first round was held in Washington. He added that another meeting has been held with all bilateral creditors to review the progress of the debt restructuring talks, media company Ada Derana reported.

“Financial assurances from our bilateral creditors would be important for us to obtain the approval of the IMF board of directors,” the minister said.

The local media has also reported that with China not playing ball, Sri Lanka may not be able to get the $2.9 billion loan from the IMF. In that case, the loan could get pushed to March next year.

The economic crisis has continued for the past one year resulting in a food and fuel shortage, massive power cuts and a complete ban on imports. The crisis has already caused a regime change as mass protests upstaged the powerful Rajapaksa family.

India has largely been the sole benefactor that supported Sri Lanka through food, essential supplies and fuel. It has also made a case for its neighbour with international lenders for assistance.

President Ranil Wickremesinghe has said he was hopeful that the IMF would release the bail-out funds in January next year.

The country had earlier appointed international legal and debt advisors for debt restructuring talks. It has to repay nearly $51 billion in foreign debt.

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