Sri Lankan President Ranil Wickremesinghe has criticised China for excluding itself from multilateral talks focused on reducing the island nation’s debt and putting it on to financial stability. However, the President added that he was confident Sri Lanka would be able to conclude the debt restructuring talks by September.
Talks initiated by Japan, France and India to bail out the beleaguered nation from its debt crisis and enable it to take an International Monetary Fund (IMF) loan took place in early May but China skipped the meeting.
Speaking on the sidelines of Nikkei’s Future of Asia Forum in Tokyo, Wickremesinghe said that his country will not provide a separate deal to China that benefits it as compared to the other countries. He said: “We will not have separate deals. We won’t give advantage to one party, we will work on the same principles”.
Colombo had reached a staff-level agreement with the IMF for a $2.9 billion bail-out loan in September 2022, which has still not materialised as the island nation has not been able to get China to restructure its bilateral debt. The IMF had mandated that Sri Lanka had to renegotiate and restructure its loans with its biggest bilateral lenders – China, India and Japan.
While India and Japan responded positively to restructuring their bilateral loans to Colombo, Beijing has either maintained a studied silence or responded by offering more loans to Sri Lanka, which will only push the country deeper into China’s debt.
During Sri Lanka’s economic crisis which began to surface in late 2021, causing inflation, food shortages, riots and a regime change, India provided support of nearly $5 billion. India also pushed the World Bank and the IMF besides lobbying with other countries to help Sri Lanka in its recovery efforts.
Nikkei reports that Sri Lanka is under $80.7 billion of public debt, with $11.1 billion as bilateral debt. China is the biggest lender with 40 per cent of Sri Lanka’s bilateral debt – which was largely given as loans for mega infrastructure projects.
The huge projects – the Hambantota Port, the Mattala Rajapaksa International Airport and the Colombo Port have not achieved their goals for Sri Lanka in terms of generating profits, increasing employment or igniting growth. Experts have labeled the projects as China’s debt diplomacy where the loans were expensive and the interest rates high, snaring Sri Lanka into an economic default.