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‘Sri Lanka’s debt to China close to 20% of public external debt’


LONDON/JOHANNESBURG: Sri Lanka owes Chinese lenders $7.4 billion – almost a fifth of its foreign public debt – at the end of last year, calculations by China Africa Studies Initiative (CARI) released on Wednesday showed, one estimate higher than many others.
The study said the figure was higher than “the commonly cited figure of 10 to 15%”, adding that “a substantial portion” of the country’s debt to China was recorded in the form of loans to China. borrowed by state-owned enterprises, not the central government.
Crisis-hit Sri Lanka is in the process of restructuring its debt after years of economic mismanagement combined with the Covid-19 pandemic plunged the country into its worst economic crisis since independence. out of the UK in 1948 and went into default.
Export-Import Bank of China (EximBank) and China Development Bank are China’s two largest lenders, accounting for $4.3 billion and $3 billion, respectively, according to data collected by CARI at its School of Advanced International Studies. Johns Hopkins University.
China is Sri Lanka’s largest bilateral creditor and, along with India and Japan, part of formal creditor talks aimed at restructuring the country’s debt.
“China will have to play an important role in Sri Lanka’s debt restructuring process,” CARI researchers Umesh Moramudali and Thilina Panduwawala wrote in the report.
The island nation kicked off negotiations with bilateral creditors in September after reaching a $2.9 billion staffing agreement with the International Monetary Fund. But the financing won’t flow until the fund’s board approves the deal, a step that requires financial guarantees from bilateral lenders.
The latest talks originally scheduled for earlier this month have been postponed, casting doubt on how quickly the debt settlement can progress.
According to the report, the island nation’s total external debt is $37.6 billion. Adding the central bank’s foreign currency debt, including a $1.6 billion currency swap with China, the foreign public debt rose to $40.6 billion, of which 22% was from creditors. debt to China.
CARI’s total debt differs from the $46.6 billion figure announced by the government in September because it excludes strong-currency debt and loans to some state-owned enterprises.
The CARI study also identified six different loans for the deep-water port in Hambantota from EximBank between 2007 and 2013 amounting to approximately $1.3 billion. The loan agreements contain provisions for “submission of loans to China’s regulatory and arbitration law before the China International Economic and Commercial Arbitration Commission”.

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