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China to Assist Sri Lanka in Financial Difficulties, Joint Statement Says

In a joint statement released on Sunday, China pledged to play a “positive role” in alleviating the financial challenges faced by debt-ridden Sri Lanka and in aiding its efforts towards achieving “debt sustainability.” Concurrently, Colombo committed to expediting the formulation of a Belt and Road Initiative (BRI) cooperation plan to bolster Beijing’s initiatives in the island nation.

As Sri Lankan Prime Minister Dinesh Gunawardena concluded his official weeklong visit to China, the joint statement outlined the key agreements reached during his discussions with Chinese President Xi Jinping and Premier Li Qiang, alongside his participation in the Boao Forum for Asia Annual Conference.

“The Chinese side expresses its readiness to continue supporting its financial institution in actively consulting with Sri Lanka, maintain friendly communication with other creditors, and play a positive role in the International Monetary Fund (IMF) to help Sri Lanka ease its financial difficulties and achieve debt sustainability,” the joint statement stated.

During Gunawardena’s visit, both nations agreed to collaborate to deepen high-quality Belt and Road cooperation, expedite the formulation of a Belt and Road cooperation plan, and exert concerted efforts to advance the Colombo Port City project and the integrated development project of Hambantota Port as flagship projects of Belt and Road cooperation between the two countries, as per the joint statement.

The Belt and Road Initiative (BRI) represents China’s expansive multi-country infrastructure initiative. Despite criticism of their financial viability, Sri Lanka has committed to accelerating the formulation of a BRI cooperation plan, according to the joint statement.

China stands as Sri Lanka’s largest bilateral lender, holding 52% of its USD 40 billion external debt when Sri Lanka declared its first sovereign default in 2022.

Seventeen countries that had extended loans to Sri Lanka formed a committee last year to discuss steps for debt restructuring negotiations, but China opted to participate solely as an observer.

Sri Lanka declared its intention to negotiate the settlement of its Chinese loans on terms comparable to those of other countries that have provided loans.

This development follows closely after the IMF, which concluded its second review of the USD 2.9 billion bailout with Sri Lanka earlier this month, emphasized that reaching an agreement with the country’s commercial creditors, international bondholders, and China Development Bank was pivotal to achieving debt sustainability.

This marked the first visit by a top Sri Lankan leader to Beijing since Colombo imposed a moratorium on recurring visits by Chinese research ships to Sri Lankan ports, purportedly due to India’s security concerns.

Colombo’s decision had elicited strong reactions from Beijing.

However, earlier this month, Sri Lanka announced it would permit foreign offshore research ships for replenishments at its ports despite imposing a one-year ban on such vessels.

Some of China’s infrastructure investments in Sri Lanka have drawn global scrutiny over Beijing’s debt diplomacy, notably after China acquired Hambantota port on a 99-year lease in a debt swap.

Source: PTI

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