New Delhi /Colombo, January 24 (Reuters): The Export-Import Bank of China has offered Sri Lanka a two-year moratorium on its debt and said it will support the country’s efforts to secure a US$2.9 billion loan from the International Monetary Fund, according to a letter reviewed by Reuters.
The Export-Import Bank of China has said in the letter that it is going to provide an extension on the debt service due in 2022 and 2023 as an “immediate contingency measure based on Sri Lanka’s request.”
At the end of 2020, China’s EXIM bank had loaned Sri Lanka US$ 2.83 billion which is 3.5% of the island’s debt, according to an IMF report released in March last year.
“ You will not have to repay the principal and interest due of the bank’s loans during the above-mentioned period,” the letter said.
“Meanwhile, we would like to expedite the negotiation process with your side regarding medium and long-term debt treatment in this window period.
“The bank will support Sri Lanka in your application for the IMF Extended Fund Facility (EFF) to help relieve the liquidity strain,” the letter said.
Sri Lanka’s foreign and finance ministries did not immediately respond to questions from Reuters.
Sri Lanka owed Chinese lenders $7.4 billion, or nearly a fifth of its public external debt, by the end of last year, calculations by the China Africa Research Initiative showed, according to Reuters.
Sri Lanka’s central bank chief P. Nandalal Weerasinghe said on Tuesday that the country hoped for assurances from China and Japan, another major bilateral lender, soon and complete debt restructuring in six months, Reuters said in its report.
Earlier, India had written to the IMF saying that it would give Sri Lanka financial assurances and debt relief. But to swing IMF help, it needed the backing of China.