Financial assistance: Government turns to China and Japan
Posted on January 8th, 2022

Courtesy The Morning

  • Finance Min. proposes seeking financial package similar to that with India 
  • Notes 20% of Sri Lanka’s foreign debt payments are to China and Japan 
  • Proposes seeking trade concessions by doing away with trade restrictions 
  • Discussion with China likely to commence during Yi visit

The Government of Sri Lanka is to look at initiating a dialogue with China and Japan to secure financial assistance packages from the two countries, similar to the one negotiated with the Indian Government, The Sunday Morning learns. Finance Minister Basil Rajapaksa last week proposed the initiation of a dialogue on financial assistance with China and Japan to the Cabinet of Ministers in a 10-page Cabinet paper presented by him at last Monday’s (3) meeting on the current economic outlook of the country and the way forward. 

Cabinet paper number 49 that was presented by the Finance Minister, seen by The Sunday Morning, has noted that the Government of Sri Lanka should look at seeking a financial package from China and Japan similar to that negotiated with India since 20% of Sri Lanka’s foreign debt is to these two countries. 

Rajapaksa has further noted that Sri Lanka’s imports from China and Japan are higher than exports and should therefore look at negotiating trade concessions with the two countries to help improve the country’s liquidity issues. 

According to the Finance Minister, ongoing trade restrictions are not beneficial for Sri Lanka’s trade relations with countries like China and Japan. 

The Cabinet paper has noted that debt repayment for 2022 stands at $ 6.9 billion while $ 1,300 million is required for debt servicing in January 2022 and $ 3,100 million for the first quarter for this year. The paper has further noted that a revenue of $ 32 billion is expected for this year from goods and services exports. 

Tourism and foreign remittances have also been listed as high revenue generation methods. In fact, foreign remittances are expected to bring in $ 7.5 billion to the country, according to the Finance Ministry. 

Meanwhile, Chinese Foreign Minister Wang Yi commenced a two-day official visit to Sri Lanka yesterday (8). The Sri Lankan Government is likely to commence discussions on financial package with Yi. 

The Finance Minister also presented a Rs. 229 billion relief package in the Cabinet paper, which offered allowances to State sector employees and pension and Samurdhi recipients while also addressing the salary anomalies of teachers, among others. 

The Minister in the Cabinet paper also referred to the calls from many quarters for the Government to approach the International Monetary Fund (IMF) for assistance to resolve the current economic crises. He has explained that the Government can manage without going before the IMF. 

It has been stated in the Cabinet paper that going before the IMF would result in the Government having to float the rupee, increase taxes and introduce price formulas for fuel, power, and water, among other conditions. All these will result in further price increases, adding further burdens on the people who are already facing many hardships,” Rajapaksa has explained to his Cabinet colleagues.

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