China Must Be Treated As Equal Sri Lanka Creditor: FM Sitharaman Tells IMF, World Bank

Sitharaman requested IMF for considering rapid aid for middle income-classified Sri Lanka, typically given only to low-income countries as the pandemic has severely impacted its tourism revenue

Finance Minister Nirmala Sitharaman

New Delhi: Finance minister Nirmala Sitharaman told the International Monetary Fund and World Bank that Chinese debt must be treated just like any other creditor once talks begin to restructure Sri Lanka’s debt.

Clarifying stance on providing loans to Sri Lanka, the Finance Minister said, “All creditors must be treated equally and with transparency.” “I’ve emphasised that point in general and in the context of Sri Lanka,” added Sitharaman in an interview in Washington on Friday, according to news agency Bloomberg.

In a bid to repay existing Chinese loans due in July, Sri Lanka is eying to borrow $1 billion from Beijing including a $1.5 billion credit line to purchase goods. The island nation, which is running out of dollars to pay for imports, is also seeking aid from India, the World Bank and the IMF.

The finance minister noted that she has requested the IMF for considering rapid aid for middle income-classified Sri Lanka, typically given only to low-income countries, as the pandemic has badly impacted the tourism revenue of the country.

Sri Lanka is facing the worst economic crisis in a decade with declining foreign-exchange earnings. It has struggled to manage its external debt, which had grown in part due to loans from China to fund ambitious infrastructure projects.

Sri Lanka had about $3.5 billion in debt from China by end-2020, excluding loans to state enterprises, according to the central bank data.

In 2022, Sri Lanka has to pay $2.2 billion of principal and interest payments for dollar-denominated bonds and loans, with the number rising to about $2.7 billion annually in both 2023 and 2024, according to the data compiled by Bloomberg.