ECONOMYNEXT – Central Bank of Sri Lanka (CBSL) Governor Nandalal Weerasinghe has urged China and India to agree to a write-down of their loans to the crisis-hit island nation.
Weerasinghe told BBC Newsnight Wednesday January 11 night that quick action would be in the interest of all parties.
“The sooner they give us finance assurances that would be better for both [sides], as a creditor, as a debtor,” the BBC website quoted Weerasinghe as telling Newsnight.
“That will help us to start repaying their obligations.
“We don’t want to be in this kind of situation, not meeting the obligations, for too long. That is not good for the country and for us. That’s not good for investor confidence in Sri Lanka,” he said.
Sri Lanka is in negotiations with the International Monetary Fund (IMF) for a 2.9 billion US-dollar extended fund facility (EFF) pending IMF board approval, which will not materialise until China and India have agreed to restructure Sri Lanka’s billions of dollars of debt to the two emerging superpowers.
Colombo owes Beijing some 7 billion US dollars while India is owed up to a billion.
Restructure talks have slowed down, and critics including at least one MP in the opposition has crticised Beijing for not showing enough interest contrary to its claims of being Sri Lanka’s true friend.
China is reportedly reluctant to write down Sri Lanka’s debt because of possible implications to loans it has extended to other developing countries. According to the BBC, India is “wary of getting inferior terms on debt restructuring to China, its regional rival.
Related:
Sri Lanka debt restructuring: opposition MP warns of “China go home” protests
The BBC quoted Weerasinghe as saying that it was possible an agreement with the IMF could come later in January but added “this all depends on the other parties – our creditors really have to make that decision”.
Sri Lanka had now provided them with all the information on the country’s borrowings they needed, he said.
Meanwhile, US ambassador to Sri Lanka Julie Chung had told the same Newsnight edition that the greater onus to move was on China, as the biggest bilateral lender.
“We hope that they do not delay because Sri Lanka does not have time to delay. They need these assurances immediately,” she was quoted as saying by the BBC website.
“For the sake of the Sri Lankan people, we certainly hope China is not a spoiler as they proceed to attain this IMF agreement.”
Private creditors account for 40 percent of Sri Lanka’s external debt stock.
A group of international economists has called for Sri Lanka’s bonds to be “cancelled”, writing: “All of Sri Lanka’s creditors must ensure debt cancellation sufficient to provide a way out of the current crisis.”
Commenting on the private bond holders, the CBSL governor had told the BBC: “We engage with private creditors in good faith negotiations. And what we are seeing is that they are very positive and they are willing to engage with us.”
The governor had added that he expected that once agreement from bilateral creditors has been agreed the IMF funds could be distributed to Sri Lanka within “four to six weeks”. (Colombo/Jan12/2023)