The president of debt-ridden Sri Lanka has asked China to help restructure billions of dollars in debt repayments as part of a solution to counter the economic fallout from the coronavirus pandemic, the presidential secretariat said on Sunday.
During his meeting with visiting Chinese Foreign Minister Wang Yi, President Gotabaya Rajapaksa said that “it would be a great relief to the country if the attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the COVID-19 pandemic,” his office said in a statement.
Rajapaksa also requested China to provide a concessional trade-credit scheme for Chinese imports and to assist in enabling Chinese tourists to travel to Sri Lanka under the bio-bubble concept, it stated.
Sri Lanka is reported to have to meet about $4.5 billion in debt repayments this year, starting with a $500 million international sovereign bond repayment on Jan. 18.
The country’s inflation rate hit a record high of 11.1 percent in November last year, with its food inflation rising to 16.9 in November 2021, according to data released by the Central Bank of Sri Lanka. The increase in prices was triggered by a decline in local currency, which fell 7.5 percent against the U.S. dollar last year.
The government subsequently declared an economic emergency under the public security ordinance and appointed an essential services commissioner to regulate food prices charged by merchants and retailers.
It is unclear if China has yet to agree to Sri Lanka’s request.
China is deemed to be Sri Lanka’s fourth-biggest lender, behind international financial markets, the Asian Development Bank, and Japan.
Over the last decade, China has lent Sri Lanka over $5 billion for highways, ports, an airport, and a coal power plant. But critics charge the funds were used for white elephant projects with low returns, which China has denied.
Sri Lanka is also a key part of Beijing’s Belt and Road Initiative, a long-term plan to fund and build infrastructure linking China to the rest of the world, but others, including the United States, have labeled it a “debt trap” for smaller nations.
In December 2017, the Sri Lanka government leased the entire Hambantota Port to China for 99 years to convert its owed loans of $1.4 billion into equity, but the move has led tens of thousands of protesters to rally against the deal.
Former U.S. Secretary of State Mike Pompeo has also warned Sri Lanka about doing business with Beijing, calling the Chinese Communist Party a “predator” which continues to violate sovereignty at land and sea.
“We see from bad deals, violations of sovereignty and lawlessness on land and sea, that the Chinese Communist Party is a predator, and the United States comes in a different way. We come as a friend and as a partner,” Pompeo said at a 2018 joint press conference in Sri Lanka.
Sunny Chao and Reuters contributed to this report.
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