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Saturday, October 1, 2022

China mum on restructuring, open to swap renegotiation – The Morning

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  • PM Ranil discusses China extensively with Indian media outlet

By Imesh Ranasinghe 

Prime Minister Ranil Wickremesinghe said that China has not responded yet to the debt restructuring talks, but has shown interest in renegotiating conditions of the idling $ 1.5 billion swap provided by them.

Speaking to the Indian media outlet WION, Wickremesinghe said that the Sri Lankan Ambassador In China has started discussions with Beijing, to which there has not been any response from the Chinese authorities.

“The matter has been taken up, I have not discussed it yet, I will be discussing it with China,” he added.

Out of the major lenders to Sri Lanka, China and India are not in the Paris Club, while Japan is in the Paris Club, which has led to Sri Lanka approaching China and India separately to restructure its debt. 

China accounts for 10% of the country’s external debt and ranks third among Sri Lanka’s creditors after Japan and the Asian Development Bank.

However, more than half of Sri Lanka’s debt of about $ 35 billion is owed to private creditors.

China has not shown a good history of debt restructuring, but it has restructured some debt. Ethiopia persuaded Beijing in 2018 to forgive some interest and stretch out repayment of a 10-year loan for a $ 4 billion railway to 30 years. That reduced annual payments, but added two more decades of interest charges.

Moreover, the Premier said that Sri Lanka has already made a request to Beijing to alter the provisions in the $ 1.5 billion currency swap given by the People’s Bank of China (PBoC).

Last week in Parliament, Wickremesinghe said that the currency swap worth $ 1.5 billion provided by China in December 2021 was entered into by officials of the then-Government to deceive the public, as Sri Lanka is required to have enough foreign reserves to cover three months of imports to utilise the swap.

“We should have gone and negotiated to delete that provision but we didn’t, so I can’t understand why we didn’t ask them to delete that provision. We made a request but the agreement is signed,” the PM said to WION, adding that China has shown interest, and that it is a question of working it out.

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