Courtesy Livemint

China assures Sri Lanka of help with debt challenges ahead of IMF bailout plan

Cash-strapped Sri Lanka is likely to get help from its largest bilateral creditor China ahead of IMF’s bailout plan. According to the PTI agency report, China has assured the island nation it will address the debt challenges before it finalises the external and domestic debt restructuring of $41 billion by September before the International Monetary Fund (IMF).

The IMF is set to conduct its first review of the $2.9 billion bailout granted to Sri Lanka in March this year from 11-19 September.

“China is always Sri Lanka’s reliable strategic partner and appreciates that Sri Lanka has always been friendly to China and has stood by China on issues related to its core interests,” China’s Foreign Minister Wang Yi said.

Crisis-ridden Sri Lanka is negotiating with its external creditors in order to meet the IMF’s condition for its first review. The Washington-based lender approved a nearly $3 billion bailout for crisis-hit Sri Lanka in March this year.

The island county should agree with all its external creditors by next month on the programme to restructure the debt of $41 billion.

The first review will consider the programme’s performance until end-June, and if approved by both the staff and the executive board, would allow a disbursement of around $338 million to Sri Lanka.

Last year, Sri Lanka was hit by the most severe economic crisis in its history when the country defaulted on its $46 billion external debt after running out of foreign exchange to finance essential food, fuel and medicines. As a result the public came out on the streets to protest the fuel, fertilisers, and essential commodities shortage.

India too helped Sri Lanka in line with its ‘Neighbourhood First’ Policy. India extended multi-pronged assistance of about $4 billion to it last year through multiple credit lines and currency support.