Sri Lanka: US wants China to share debt restructuring plan

COLOMBO (News 1st); US Ambassador to Sri Lanka Julie Chung says that the Chinese Exim Bank restructuring proposal with Sri lanka should be shared with the other creditors.

She was speaking exclusively on 'The People's Plaform' program on News 1st on Wednesday (8), and said that the US is waiting on China to share the debt restructuring proposal that it pur forward via the Chinese Export and Import Bank.

"We hope that there is an equal, comparable approach by all creditors," she said. 

The US Ambassdor said that with the proposal made available Sri Lanka can move forward with the IMF restructuring and then be able to address some of its macro-economic policies and governance issues of the past.

"It is important to continue on the strong structural reforms that address good governance, transparency, anti-corruption and to really make Sri Lanka well. Not only be well, but be really healthy and prosper," she added.

China has already said that it will continue to support Chinese financial institutions in actively consulting with Sri Lanka.

Foreign Ministry Spokesperson Wang Wenbin speaking at the Regular Press Conference on 31st October said that China will continue maintaining friendly communication with other creditors and jointly play a positive role in helping Sri Lanka navigate the situation, ease its debt burden and achieve sustainable development.

He told reporters that, as an official creditor, the Export-Import Bank of China tentatively agreed with Sri Lanka on the debt treatment, and the Sri Lankan side has released relevant information.

On the 11th of October 2023, the Ministry of Finance of Sri Lanka issued the following statement with regard to the agreement reached with the Exim Bank of China: 

The Government of the Democratic Socialist Republic of Sri Lanka is pleased to announce that it has reached an agreement on the key principles and indicative terms of a debt treatment with the Export-Import Bank of China (“China Exim bank”). 

The agreement in principle covers approximately USD 4.2bn of outstanding debt. It constitutes a key step towards restoring Sri Lanka’s long-term debt sustainability and will pave the way to a prompt economic recovery.

The indicative terms agreed will provide the necessary fiscal space for Sri Lanka to implement its ambitious reform agenda. 

The Sri Lankan Government commends the engagement and continuous support of China Exim bank in reaching this agreement in principle, which demonstrates a mutual commitment in line with the goal/objective of restoring public debt sustainability consistent with the IMF-supported program.

The Sri Lankan authorities hope that this landmark achievement will provide an anchor to their ongoing engagement with the Official Creditor Committee and commercial creditors, including the bondholders.

It should also facilitate approval by the IMF Executive Board of the first review of the IMF-supported program in the coming weeks, allowing for the next tranche of IMF financing of about US$334 million to be disbursed.

The Secretary to the Treasury Mr. K M Mahinda Siriwardana issued the following statement:

“Yesterday marked a big step for Sri Lanka as we reach this landmark agreement in principle on debt treatment terms with our largest single creditor. We thank China Exim bank for the support in resolving our country’s debt situation. This agreement constitutes a key milestone in Sri Lanka’s ongoing efforts to foster its economic recovery.”

In the next few weeks, the Sri Lankan authorities and China Exim bank will actively work on formalizing and implementing the agreed parameters of the debt treatment.