Prime Minister Dinesh Gunawardena said China – the island’s biggest bilateral creditor – would “assist” Sri Lanka’s restructuring of external debt, a key condition to maintaining a US$2.9 billion IMF bailout.
Beijing’s position on debt restructuring has not been made public, but Sri Lankan officials have said China was reluctant to take a haircut on its loans but could extend the tenure and adjust interest rates.
Sri Lanka in 2022 ran out of foreign exchange to finance essential imports and declared a sovereign default on its US$46 billion foreign debt.
Are China-backed mega projects causing Sri Lanka to face ‘Chinese debt trap’?
Are China-backed mega projects causing Sri Lanka to face ‘Chinese debt trap’?
Gunawardena’s office said Premier Li Qiang had promised China would “assist Sri Lanka’s debt restructuring process continuously and help Sri Lanka to develop its economy”.
Gunawardena said Beijing had offered “assistance to develop” Colombo International Airport and Hambantota port, the statement added, without giving further details.
A Japanese-funded expansion of Colombo airport had been on hold since Sri Lanka’s sovereign debt default.
India and the United States are both concerned that a Chinese foothold at Hambantota, on the island’s southern coast, could boost its naval advantage in the Indian Ocean.
Sri Lanka has insisted its ports will not be used for any military purposes, but New Delhi has objected to Chinese research vessels calling at Hambantota fearing that they could be used for espionage.
