Sri Lanka banks on India as China dithers

Jan 16 (The Economic Times) – After concluding debt restructuring talks with Japan, Sri Lanka is set to begin consultations with India. China, another major lender, continues to drag its feet.

External affairs minister S Jaishankar is expected to visit Colombo this week to meet stakeholders and discuss debt restructuring, ET has learnt.

As Sri Lanka has defaulted on its debt repayments, it is negotiating a $2.9 billion bailout from the International Monetary Fund, which has conveyed its unwillingness to release funds until India and China agree to reduce Sri Lanka’s debt. The Central Bank of Sri Lanka has urged creditors India and China to restructure debt.

China has lent nearly $7 billion to Sri Lanka, which owes around $1 billion to India. In addition, India provided financial assistance of around $4 billion to Sri Lanka in 2022.

“On January 19, the Indian foreign minister is expected to visit, and we will continue to have debt restructuring talks with India,” Sri Lankan president Ranil Wickremesinghe said last week in Colombo.

He had said that Sri Lanka would receive nearly $5 billion from the World Bank and Asian Development Bank. “The total will be $7.5 billion, including from IMF. Adding $3 billion from the restructuring of unprofitable government agencies can add up to $10 billion, which will enable the economy to recover and bring the country out of this suffering,” Wickremesinghe said.

China, Japan and India are Sri Lanka’s largest bilateral creditors, and Colombo is counting on their cooperation for its economic revival.

Wickremesinghe said that he was looking forward to the IMF facility in 3-4 tranches, adding, “I want to lift this country out of the plunge sooner.”

Sri Lanka has been using Indian credit lines since early 2022 to import essentials and fuel after street protests erupted due to severe shortages of essentials.

Wickremesinghe further said, “…The countries that have given us loans have already stated their willingness to assist us. Japan and the Paris Club, two of our three major creditors, have expressed their willingness to assist.”

He also pointed out that the largest numbers of entrepreneurs that are not recognized in Sri Lanka are moneylenders. “There are a large number of women moneylenders, and in some areas, they are the ones who dominate. The government, too, is interested in looking at all the micro-enterprises, not only by women but also by men.” He revealed that the number of women entrepreneurs is small compared to many other countries and said that the country needs more business women and for this, the main chamber will help, reported the Sri Lankan President’s Media Division.

“Though Sri Lanka’s population consists of 52 per cent females, we should at least have a large number of women entrepreneurs that can come and certainly help to develop the economy,” Wickremesinghe said.

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Source: NewsAsia