Sri Lanka has asked China to help it deal with its rising debt by allowing it to restructure its debt payments. Sri Lankan President Gotabaya Rajapaksa issued the request during his meeting with Chinese foreign minister Wang Yi on Sunday.
Over the past decade, Sri Lanka has borrowed over $5 billion from China for various infrastructure projects. The nation has used the money to build multiple roads, airports, and port projects. Critics of the nation's massive borrowing have accused the government of spending the money on some unnecessary projects with low economic returns.
Rajapaksa's office said that the nation had asked China to restructure its debt repayments, which the president claims would be a "great relief" to the country as it navigates its deteriorating financial situation amid the ongoing COVID-19 pandemic.
Apart from restructuring its debts, Rajapaksa also reportedly asked China to provide "concessional terms" for exports coming into the country. The office did not provide any further details regarding the request.
Sri Lanka is a crucial part of China's Belt and Road Initiative, a long-term plan to fund and develop infrastructure linking China to the rest of the globe. However, other governments, notably the U.S., have called the initiative a "debt trap" for smaller and poorer states. China has repeatedly denied the accusations, slamming the U.S. and its allies for attempting to tarnish its reputation.
Rajapaksa reportedly told Chinese officials that he was willing to allow Chinese tourists to travel to the country provided they follow local pandemic restrictions and protocols. Sri Lanka imports a big majority of its goods from China, and it also generates a lot of tourism income from Chinese visitors.
Over the past years, Sri Lanka has lost a significant amount of economic revenue due to the pandemic, which has been made worse by the decline in Chinese tourism.
China is Sri Lanka's fourth-largest lender, behind Japan, the Asian Development Bank, and the international financial markets. The pandemic and a worsening foreign exchange crisis have threatened the nation's ability to repay its international debts.
In September last year, the country declared a state of economic emergency after the value of its currency fell at alarming rates. The decline resulted in the rise in prices of basic food items.
Sri Lanka is due to make a $500 international sovereign bond payment on January 18. Sri Lanka's central bank has assured investors that all debt repayments will be made, and money for this month's bond repayment has already been allocated.
