ECONOMYNEXT – China is working with other lenders on easing Sri Lanka’s debt burden, a Chinese diplomat said as country attempts to re-structure debt after the country defaulted on foreign debt after two years of money printing.
“China is actively working with relevant countries and international financial institutions to support Sri Lanka to ease the debt burden and realize sustainable development,” Li Guangjun, Economic and Commercial Counselor, Embassy of Peoples’s Republic said.
He was speaking at the 21st Annual General Meeting of Sri Lanka – China Business Council of the Ceylon Chamber of Commerce.
Sri Lanka and China is celebrating 65th anniversary of diplomatic relations.
2022 was also the 70the anniversary of a rubber-rice pact, a barter deal made when the US Fed fired a global commodity bubble purchasing Liberty Bonds for new money, and hit the monetary brakes sending ripples similar to 2022 across the world.
“Over the past decade bilateral relations have been cordial and friendly which had made the possibility of great progress in achieving economic and trade co-operation between our two countries,” Li said.
In 2021 China was Sri Lanka’s second largest trading partner and the largest source of foreign direct investment, he said.
“In spite of the pandemic and sluggish global growth business ties have continued to grow,” Li said.
Sri Lanka ran up foreign debt steeply from 2015 to 2022 taking in so-called ‘cover up’ loans as the country experienced three currency crises in a row while printing money to suppress rates under flexible inflation targeting and lost the ability to make foreign payments.
China itself gave monetary instability loans without pressing Sri Lanka to tighten monetary policy.
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Sri Lanka is now seeking a 2.9 billion US dollar loan from IMF, with domestic investment smashed to reduce outflows and regain external stability.
However an agreement from from China and India to re-structure debt called a ‘creditor assurance’ is needed to unlock new funding. (Colombo/Nov20/2022)
The rubber/rice pact ensured that we get rice supplied with rice by China and regularly so. However, the rubber that was bought and shipped to China was given a premium for grades up to RSS No.3 and was surveyed for quality before shipment, and the first board of surveyors brought credit to the country, and was recognised by them and appreciated, and even earned the praise of the Minister, R.G.Senanayake, who was among the many devoted Ministers and honest to the last cent. His wife served him as his private secretary and hardly claimed anything in return. It all ended on a disgraceful note, with the continued interference of political appointees who passed substandard rubber, and were allowed to get away with it. They have always been a friend to us and have been a friend indeed. Today, our parliament and most commanding posts have become a den of thieves, with the government being illicitly appointed and issuing illegal orders.