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China’s Exim Bank to support debt restructuring plan

China’s Exim Bank to support debt restructuring plan

23 Jan 2023

  • Shehan Semasinghe says letter of assurance received
  • Reports that agreement is for two-year debt moratorium

The Export-Import Bank of China (EXIM) has agreed, in writing, to support Sri Lanka’s debt restructuring programme, State Minister of Finance Shehan Semasinghe said over the weekend, while it was also reported that the EXIM Bank has agreed to a two-year moratorium on Sri Lankan debt.

Stating that the debt restructuring plan has been successful thus far, Semasinghe observed that the Government of Sri Lanka aims to obtain International Monetary Fund (IMF) Executive board approval for an Extended Fund Facility (EFF) within the first quarter of this year.

Semasinghe’s announcement comes in the backdrop of India, too, confirming its support towards the island’s debt restructuring plan. On 16 January, India informed the IMF that it strongly supports Sri Lanka’s debt restructuring plan, as the island nation seeks a $ 2.9 billion loan from the global lender.

“We, hereby, confirm our strong support for Sri Lanka’s prospective [loan] programme and commit to supporting Sri Lanka with financing/debt relief consistent with restoring Sri Lanka’s public debt sustainability,” Indian Finance Ministry official Rajat Kumar Mishra informed the IMF Chief.

Meanwhile, India’s Hindustan Times newspaper reported that China was expected to hand over its letter of support towards the financing and debt restructuring of Sri Lanka to the IMF yesterday (22).

The Modi Government has conveyed that this financing/debt relief will be provided by the Export-Import Bank of India.

Meanwhile, during his most recent official visit to Sri Lanka, Indian External Affairs Minister Dr. S. Jaishankar also assured that the Indian Government will provide all possible support to solve the current economic problems faced by Sri Lanka.

Speaking on securing financial assurance from China, the island’s largest bilateral lender, Deputy Secretary to the Treasury Priyantha Ratnayake told Reuters on Friday (20) that discussions with China are in the final stage.

“It is difficult to provide details of the debt restructuring negotiations because of the confidentiality of discussions,” he said, adding: “However, we can say that discussions with China are at the final stage, and we expect their assurances in the next few days.”

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