Colombo, January 29 (The Sunday Morning): Sri Lanka has been informed by the IMF that the Chinese proposal on debt restructuring is not adequate. And China has asked Sri to continue negotiations with th Chinese Exim Bank.
The Export-Import (Exim) Bank of China recently sent a letter to the Finance Ministry stating that it supported Sri Lanka’s EFF with the IMF and that China could offer a two-year debt moratorium.
A highly-placed Government source told The Sunday Morning that the IMF had however informed the Sri Lankan Government that the Chinese proposal was not adequate to proceed with the fund’s planned programme.
“The IMF has been very clear on its expectations on the debt restructuring programme and it has said that in relation to bilateral creditors, it should be a uniform programme for all such creditors. India and Japan have understood and agreed. But China has not responded as expected,” the source noted.
“China has so far not supported the debt restructuring programme,” the source added.
It is also learnt that Paris Club is expected to release a statement this week extending support to Sri Lanka’s debt restructuring programme.
The Paris Club, it is learnt, has proposed a 10-year debt moratorium and 15-year debt restructuring for Sri Lanka, which will provide the country adequate time to get its financial issues in order.
According to the source, several countries outside the Paris Club like Saudi Arabia and Kuwait have also agreed to support Sri Lanka’s debt restructuring programme.
It is in such a backdrop that Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe had told a foreign media outlet that he was hopeful of completing debt restructuring negotiations in the next six months.
When asked if President Wickremesinghe would reach out to Chinese Government leaders to reach a consensus on the debt restructuring issues, the Government source explained that the Chinese Government was continuing to direct the Sri Lankan Government to negotiate with the Exim Bank of China on the issue of debt restructuring.
“The President will therefore intervene this week to open a line of communication with Chinese Government leaders in order to reach an agreement on debt restructuring,” the source observed.
“Everything is hanging in the balance until China comes around,” the source noted.
Lankan President Ranil Wickremesinghe is expected to open a line of communication with the Chinese government leaders to finalize the ongoing debt restructuring negotiations with Sri Lanka’s key bilateral creditors including China.
The delay in finalizing Sri Lanka’s debt restructuring program, especially with the key bilateral creditors – Japan, India, and China – has also resulted in delay in moving ahead with the proposed Extended Fund Facility (EFF) with the International Monetary Fund (IMF).
However, India was the first among Sri Lanka’s creditors to officially communicate to the IMF its support for Sri Lanka’s debt restructuring and financing program.
Japan last week also expressed support for Sri Lanka’s debt restructuring program through the Paris Club, leaving only China to make an official statement on the matter.