Prime Minister Ranil Wickremesinghe has said that China will help Sri Lanka weather the financial crisis.
“China has offered ‘a few hundred million dollars’ in lending to Sri Lanka to help alleviate a shortage of essential goods in the crisis-hit country,” the UK’s Financial Times said quoting Wickremesinghe. FT said Wickremesinghe hopes to finalise the Chinese loan as his Government seeks emergency aid to keep its economy going as it negotiates an IMF bailout. He added that talks with Beijing over additional lending were at an early stage.
“It’s quite substantial. It would be a few hundred million dollars,” he told the Financial Times in an interview. “It’ll still help us get hold of essential consumer items, fertilisers… the Ministry of Finance is having discussions on some of the items.”
FT said Sri Lanka’s ties with Beijing, particularly its participation in the Belt and Road infrastructure project, have been a source of friction with neighbouring India, which views its rival’s activity on the island as a national security threat.
Since joining embattled President Gotabaya Rajapaksa’s Government, Wickremesinghe has sought to smooth Sri Lanka’s relations with its allies in order to secure additional funding. Sri Lanka is seeking as much as $ 4 billion from the IMF, and Wickremesinghe said he hoped a deal could be agreed as early as next month.
Wickremesinghe dismissed concerns that additional Chinese funding could complicate ties with India, which has been Sri Lanka’s biggest benefactor this year with credit lines, swaps and other assistance equivalent to more than $ 3 billion.
But he added that India’s aid would “not [continue] beyond a point” and Sri Lanka would have to seek more funding from Japan and China.
“With India we’ve had a special relationship and, as long as we don’t do anything to harm India’s national security, we can get along,” he said.
Sri Lanka’s Government this year asked China to renegotiate its existing debts, which total about $ 3.5 billion. But Beijing has refused and instead offered to provide aid and additional loans.
Wickremesinghe, who also took over the role of Finance Minister last Wednesday after the post was vacant for more than two weeks, said he would only approach Beijing and other creditors including private bondholders for restructuring talks once an IMF deal has been agreed.
But he added that it was too soon to know whether Sri Lanka could expect China to agree to equal treatment with other creditors including private bondholders. “We may not have that bargaining power,” he said. “Among the countries, we have to treat everyone the same at least.”