COLOMBO, Oct 19: Sri Lanka on Thursday said China has expressed its commitment to support the country’s efforts to restructure its external credit to comply with the reforms suggested by IMF for releasing the second tranche of the USD 2.9 billion bailout package.
President Ranil Wickremesinghe who is on a four-day visit to Beijing from October 16-20 had talks with the Chinese Finance Minister Liu Kun who assured “an extensive commitment from China to enhance Sri Lanka’s credit optimisation,” a statement from the President’s office here said.
According to the statement, the Chinese Finance Minister reaffirmed China’s commitment to extend comprehensive support for the implementation of a medium-term and long-term programme that is mutually beneficial to both parties and aimed at optimising Sri Lanka’s debt.
China holds about 52 per cent of Sri Lanka’s USD 46 billion external credit.
Last week, Sri Lanka concluded a preliminary deal with China on the restructuring of its debts to Beijing.
Both nations reached an agreement on the key principles and indicative terms of debt treatment with the Export-Import Bank of China.
The agreement in principle covers approximately USD 4.2 billion of outstanding debt.
However, Sri Lanka’s Finance Ministry in a statement issued here on Thursday said it was not in agreement with a proposal by the group of private bond holders made on October 13 relating to the country’s outstanding international bonds.
“The authorities of Sri Lanka wish to acknowledge the Group’s proposal, and further clarify that this proposal has not received a favourable response from Sri Lanka. The authorities and their advisors intend to take the necessary time to consider the proposal and assess its compatibility with the parameters in Sri Lanka’s IMF-supported programme and the comparability of treatment principle, compliance with both of which is imperative for the authorities”, the statement said.
It said Sri Lanka “invites the Group to further engage with the country’s debt advisors, to progress the matter in a reasonable and viable way”.
In March this year, the International Monetary Fund (IMF) approved a 48-month, USD 2.9 billion extended arrangement under the Extended Fund Facility (EFF) to support Sri Lanka’s economic policies and reforms.
The IMF however had made external debt restructuring conditional to the 4-year programme.
In September the second tranche of USD 300 million was held back due to the inconclusive nature of debt restructuring.
Sri Lanka was hit by its worst economic crisis in history last year when its foreign exchange reserves fell to a critical low and the public came out on the streets to protest the shortage of fuel, fertilisers and essential commodities. (PTI)
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