{"id":131327,"date":"2023-01-12T17:18:23","date_gmt":"2023-01-13T00:18:23","guid":{"rendered":"https:\/\/www.lankaweb.com\/news\/items\/?p=131327"},"modified":"2023-01-12T17:18:23","modified_gmt":"2023-01-13T00:18:23","slug":"sri-lankas-central-bank-urges-china-and-india-to-reduce-its-debts","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2023\/01\/12\/sri-lankas-central-bank-urges-china-and-india-to-reduce-its-debts\/","title":{"rendered":"Sri Lanka&#8217;s central bank urges China and India to reduce its debts"},"content":{"rendered":"<h2 class=\"ssrcss-68pt20-Text-TextContributorName e8mq1e96\"><span style=\"color: #0000ff;\"><em>By Ben Chu Economics editor, Newsnight Courtesy BBC<\/em><\/span><\/h2>\n\n\n<p><strong>Sri Lanka&#8217;s central bank has urged China and India to agree a write-down of their loans as soon as possible.<\/strong><\/p>\n\n\n\n<p>The crisis-hit Indian Ocean state defaulted on its debt repayments and negotiated a $2.9bn (\u00a32.4bn) bailout.<\/p>\n\n\n\n<p>But the International Monetary Fund will not release the cash until China and India first agree to reduce Sri Lanka&#8217;s billions of dollars of debt.<\/p>\n\n\n\n<p>The governor of Sri Lanka&#8217;s central bank told BBC Newsnight it was in the interest of all parties to act quickly.<\/p>\n\n\n\n<p>P. Nandalal Weerasinghe said: &#8220;The sooner they give us finance assurances that would be better for both [sides], as a creditor, as a debtor.&#8221;<\/p>\n\n\n\n<p>&#8220;That will help us to start repaying their obligations,&#8221; he added.<\/p>\n\n\n\n<p>&#8220;We don&#8217;t want to be in this kind of situation, not meeting the obligations, for too long. That is not good for the country and for us. That&#8217;s not good for investor confidence in Sri Lanka.&#8221;<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><a href=\"https:\/\/www.bbc.co.uk\/news\/world-61028138\">Why is Sri Lanka in crisis?<\/a><\/li><\/ul>\n\n\n\n<p>Though inflation in the country has eased slightly since last year, food prices in Sri Lanka last month were still 65% higher than a year earlier.<\/p>\n\n\n\n<p>The World Food Programme estimates that 8 million Sri Lankans &#8211; more than a third of the population &#8211; are&nbsp;<a href=\"https:\/\/www.bbc.co.uk\/news\/business-63868497\">&#8220;food insecure&#8221;<\/a>, with hunger especially concentrated in rural areas.<\/p>\n\n\n\n<p>The economic turmoil sparked mass protests last year, which resulted in the former president fleeing the country in July.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/ichef.bbci.co.uk\/news\/976\/cpsprodpb\/1839A\/production\/_128262299_capture.jpg\" alt=\"P. Nandalal Weerasinghe\"\/><figcaption>Image caption,The governor of Sri Lanka&#8217;s central bank P. Nandalal Weerasinghe urged China and India to act quickly<\/figcaption><\/figure>\n\n\n\n<p>The World Bank estimates that Sri Lanka&#8217;s economy shrank by 9.2% in 2022 and that it will contract by a further 4.2% this year.<\/p>\n\n\n\n<p>Beijing&#8217;s lending to Sri Lanka stands at around $7bn while India is owed around $1bn.<\/p>\n\n\n\n<p>The Sri Lankan government had initially hoped to agree a new payment plan with China and India by the end of 2022.<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><a href=\"https:\/\/www.bbc.co.uk\/news\/world-asia-64142694\">Sri Lanka&#8217;s protesters have gone silent &#8211; for now<\/a><\/li><\/ul>\n\n\n\n<p>Mr Weerasinghe said it was possible an agreement could come later in January but added &#8220;this all depends on the other parties &#8211; our creditors really have to make that decision&#8221;.<\/p>\n\n\n\n<p>He added that Sri Lanka had now provided them with all the information on the country&#8217;s borrowings they needed.<\/p>\n\n\n\n<p>Independent analysts say China is concerned about what a substantial Sri Lankan debt write down could mean for its extensive lending to other developing countries through its Belt and Road programme.<\/p>\n\n\n\n<p>Meanwhile, India is said to be wary of getting inferior terms on debt restructuring to China, its regional rival.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/ichef.bbci.co.uk\/news\/976\/cpsprodpb\/2856\/production\/_128262301_julie.jpg\" alt=\"The US ambassador to Sri Lanka, Julie Chung\"\/><figcaption>Image caption,The US ambassador to Sri Lanka, Julie Chung said Sri Lanka had no time to delay in resolving its debts<\/figcaption><\/figure>\n\n\n\n<p>The US ambassador to Sri Lanka, Julie Chung, said the greater onus to move was on China, as the biggest bilateral lender.<\/p>\n\n\n\n<p>&#8220;We hope that they do not delay because Sri Lanka does not have time to delay. They need these assurances immediately,&#8221; ambassador Chung told BBC Newsnight.<\/p>\n\n\n\n<p>&#8220;For the sake of the Sri Lankan people, we certainly hope China is not a spoiler as they proceed to attain this IMF agreement.&#8221;<\/p>\n\n\n\n<p>But if India and China do ultimately agree to write down their loans to Sri Lanka another potential problem looms in the form of private creditors, who account for 40% of the country&#8217;s external debt stock.<\/p>\n\n\n\n<p>In the years after Argentina plunged into economic crisis and default in 2001, some American hedge funds, rather than accepting a restructuring of the sovereign bonds they had bought on the open market, demanded full repayment and took the country&#8217;s government to court in the US to achieve it.<\/p>\n\n\n\n<p>A large group of international economists on 8 January called for Sri Lanka&#8217;s bonds, to be &#8220;cancelled&#8221;, writing: &#8220;All of Sri Lanka&#8217;s creditors must ensure debt cancellation sufficient to provide a way out of the current crisis.&#8221;<\/p>\n\n\n\n<p>Asked about Sri Lanka&#8217;s private bondholders, Mr Weerasinghe said: &#8220;We engage with private creditors in good faith negotiations. And what we are seeing is that they are very positive and they are willing to engage with us.&#8221;<\/p>\n\n\n\n<p>The governor said he expected that once agreement from bilateral creditors has been agreed the IMF funds could be distributed to Sri Lanka within &#8220;four to six weeks&#8221;.<\/p>\n\n\n\n<p><em>Additional reporting by Jack Garland and Scarlett Barter.<\/em><\/p>\n\n\n\n<p><em>Newsnight Global is broadcast from Sri Lanka on Thursday 12 January<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Ben Chu Economics editor, Newsnight Courtesy BBC Sri Lanka&#8217;s central bank has urged China and India to agree a write-down of their loans as soon as possible. The crisis-hit Indian Ocean state defaulted on its debt repayments and negotiated a $2.9bn (\u00a32.4bn) bailout. But the International Monetary Fund will not release the cash until [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102,193],"tags":[],"class_list":["post-131327","post","type-post","status-publish","format-standard","hentry","category-economy","category-imf-bailout-package"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/131327","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=131327"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/131327\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=131327"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=131327"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=131327"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}