'The ball is in Sri Lanka's court', says China on debt restructuring request

China has said ”the ball is in Sri Lanka’s court” as it avoided giving a direct reply to the island nation’s request of restructuring its debt, according to a media report.

Sri Lankan has been urging China to restructure its debt as the nation continues to reel under an acute economic crisis. It is estimated that Sri Lanka owes debt payments of USD 1.5 to 2 billion this year to China. Overall China’s loans and investments in Sri Lanka were estimated to be more than USD eight billion in the last few years.

But Beijing has not made a public commitment for debt relief assistance to Sri Lanka so far.

Quoting a Chinese embassy spokesman, the Daily Mirror news website on Saturday reported that Beijing had communicated to the Sri Lankan Finance Ministry three months ago about its readiness to discuss how to address the debt issue with the Chinese banks.

China encouraged its banks to discuss it. The Chinese position was also communicated during the telephone conversation between Chinese Premier Li Keqiang and then Sri Lankan Prime Minister Mahinda Rajapaksa, he said.

“We sent proposals to the Finance Ministry. But, there was no response from them. Also, Sri Lanka insisted that it should complete the agreement with the International Monetary Fund (IMF) first. The ball is in Sri Lanka’s court,” the spokesman said.

Sri Lanka’s total bilateral debt was estimated at USD 6.2 billion at the end of 2020 by the IMF. Japan and China hold the largest shares, the report said. India has provided around USD 4 billion to help keep Sri Lanka’s economy afloat, mainly through credit lines and swaps this year. Sri Lanka also has USD 14 billion of international sovereign bond debt. Sri Lanka, a country of 22 million people, is under the grip of unprecedented economic turmoil, the worst in seven decades. The crisis has that has left millions struggling to buy food, medicine, fuel and other essentials.

The country, with an acute foreign currency crisis that resulted in foreign debt default, had announced in April that it is suspending nearly USD 7 billion foreign debt repayment due for this year out of about USD 25 billion due through 2026. Sri Lanka is currently scrambling to chalk out a staff-level agreement with the the International Monetary Fund (IMF) for a bailout programme, which could be the antidote for the country’s current economic travails. An IMF team met Sri Lanka’s President Ranil Wickremesinghe on Wednesday for talks on a bailout package. Debt restructuring is a prerequisite for the IMF facility. China’s willingness to provide debt relief to Sri Lanka will be vital to accelerate the debt restructuring.