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Debt restructuring: China sends letter to Finance Ministry

Debt restructuring: China sends letter to Finance Ministry

4 months ago | By Our Political Editor

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  • Govt. expected China to send letter to IMF on debt restructuring
  • Chinese letter to SL Govt. expresses support of IMF programme
  • Govt. to continue with negotiations with China to finalise deal


China has sent a letter last week to Sri Lanka’s Finance Ministry expressing its support to the International Monetary Fund (IMF) programme being pursued by Sri Lanka as a solution to the ongoing economic crisis faced by the country, The Sunday Morning learns.

The letter was received by the Finance Ministry last week, a few days after India had sent a letter to the IMF expressing the country’s support for Sri Lanka’s debt restructuring programme.

A senior Government source told The Sunday Morning that the Sri Lankan Government was expecting the Chinese Government to respond in a positive manner to the debt restructuring programme, like India. Instead, it is reliably learnt that the Chinese have sent a letter to Sri Lanka’s Finance Ministry saying that it would support the IMF programme.

The senior Government source noted that the Government was hopeful of a positive letter from the Chinese, similar to the one sent by the Indians, and was “rather disappointed” with the letter received from the Chinese side.

“However, we will continue with the negotiations (debt restructuring) and hope for the best,” the source said, reiterating that the response received from China fell short of what was expected.

India’s willingness to cooperate with the Paris Club on the issue of Sri Lanka’s debt restructuring is not being shared by the Chinese, it is also learnt.

The Paris Club has proposed that debt restructuring be uniform for all creditors, with suggestions that private creditors be offered a haircut while bilateral creditors are offered loan deferrals.

The IMF, meanwhile, has reportedly been in talks with China to try and convince the country to restructure Sri Lanka’s debt.

During a roundtable media interaction, IMF Managing Director Kristalina Georgieva has stated that the IMF wants to help China understand both the whole issue of debt sustainability and what can be a pathway for its contribution.

The Indian Government last week took yet another step in its support towards neighbouring Sri Lanka finding reprieve to its economic woes by sending an official letter to the IMF expressing India’s support to Sri Lanka’s debt restructuring programme.

The letter sent by Indian Ministry of Finance Department of Economic Affairs Additional Secretary Rajat Kumar Mishra on Monday (16) to the IMF Managing Director states: “We acknowledge Sri Lanka’s deep unsustainable debt situation and the Sri Lankan authorities’ recent efforts to engage their official and commercial creditors toward a solution to restore debt sustainability under the IMF financial support. We hereby confirm our strong support for Sri Lanka’s prospective EFF-supported programme and commit to supporting Sri Lanka with restoring Sri Lanka’s public debt sustainability under the IMF-supported programme and ensuring that the programme is fully financed as projected by IMF staff. This financing/debt relief will be provided by the Export-Import Bank of India.”

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