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HomeBELT AND ROAD AND OTHER CHINESE DEBT TRAPSChina keeps Sri Lanka in debt grip!

China keeps Sri Lanka in debt grip!

China’s control over Sri Lanka’s debt is hindering the nation’s efforts to secure vital financial support from the International Monetary Fund (IMF). Sri Lanka’s inability to secure a definitive debt relief agreement with China, its primary bilateral lender, is impeding negotiations with other creditors and preventing access to funds from a $3 billion IMF bailout.

During a recent visit by IMF officials, the slow progress of Sri Lanka’s external debt restructuring was underscored, resulting in the denial of the second tranche of $330 million in aid. The IMF, emphasizing the necessity of “financing assurances” from bilateral lenders, expressed concern about Sri Lanka’s handling of its financial challenges. As President Ranil Wickremesinghe plans to visit China in mid-October for the 10th-anniversary summit of the Belt and Road Initiative, discussions with Chinese President Xi Jinping on debt relief are anticipated. Diplomatic sources suggest that China’s reluctance to address Sri Lanka’s debt situation is a significant factor contributing to the impasse, adding complexity to the country’s pursuit of essential financial assistance.

The IMF, while not explicitly pointing fingers in its review statement, indirectly acknowledged China’s role in the delay, emphasizing the importance of completing financing reviews for the approval of additional aid.

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