Crisis-hit Sri Lanka asks China to restructure debt repayments

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Sri Lankan President Gotabaya Rajapaksa has asked China to restructure the crisis-hit island nation’s debt repayments as part of efforts to help the South Asian country navigate its worsening financial situation, the BBC reported.

Rajapaksa made the request during a meeting with Chinese Foreign Minister Wang Yi on Sunday.

In the last decade, China has lent Sri Lanka over $5 billion for projects including roads, an airport and ports, the BBC report said.

China is Sri Lanka’s fourth biggest lender, behind international financial markets, the Asian Development Bank and Japan.

But critics say the money was used for unnecessary schemes with low 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,” Rajapksa’s office said in a statement.

The statement also said China was asked to provide “concessional” terms for its exports to Sri Lanka, which amounted to around $3.5 billion last year, without providing further details, the report added.

Rajapaksa also offered to allow Chinese tourists to return to Sri Lanka provided they adhere to strict coronavirus regulations.

Before the pandemic, China was Sri Lanka’s main source of tourists and it imports goods from the Asian giant more than from any other country.

In recent months, Sri Lanka has been experiencing a severe debt and foreign exchange crisis, which has been made worse by the loss of tourist income during the pandemic, the BBC report said.

The country has received billions of dollars of soft loans from China but the island-nation has been engulfed in a foreign exchange crisis which some analysts have said has pushed it to the verge of default, as per the BBC report.

Sri Lanka has to repay about $4.5 billion in debt this year starting with a $500 million international sovereign bond, which matures on January 18.

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