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If China restructures debt, others will follow: S. R. Attygalle

16 Jan 2022

  • Attygalle optimistic of receiving financial assistance from lenders
By Yakuta Dawood  The Government of Sri Lanka is optimistic of succeeding in its plan to restructure its debt with bilateral and multilateral lenders if its current attempts to restructure the debt with the Chinese Government materialises, the Treasury told The Sunday Morning Business.  Speaking to The Sunday Morning Business, Treasury Secretary S. R. Attygalle stated that if the Government of China were to extend its support to Sri Lanka, and given the existing supporting ally, the Government of India, other lenders would also be willing to help Sri Lanka restructure its debt repayment.  “India has supported us, and similarly the Cabinet requested China to restructure the debt. We will see how it goes; when these two Governments do so, certain others will also follow,” Attygalle said. United National Party (UNP) Leader and former Prime Minister Ranil Wickremesinghe, in an interview held last week for international news agency WION, opined that Sri Lanka would not be restructuring its debt with the Chinese Government.  “If China restructures its debt, it will also have to do so for a large number of countries on the Belt and Road Initiative, so I don’t think there will be restructuring on the debt, because you can’t restructure the debt of one country and not on the others,” Wickremesinghe highlighted.  Meanwhile, responding to this claim by Wickremesinghe and others in opposition, Attygalle said that there could be different forms of restructuring debt; for example, one could be given the option of not settling payments now but doing so after two years and so on.  “If the lender is willing to give, then what is the problem? It’s his money and he is saying to pay later. These are bilateral loans with China and if the lender is willing to postpone, there is no problem,” Attygalle stressed. On 9 January, President Gotabaya Rajapaksa put forward this request at a meeting held with Chinese Foreign Minister Wang Yi.  “The President pointed out that it would be a great relief to the country if attention could be paid to restructuring debt repayments as a solution to the economic crisis that has arisen in the face of the Covid-19 pandemic,” the President’s Office said. The statement also said China was asked to provide “concessional” terms for its exports to Sri Lanka, which amounted to around $ 3.5 billion last year, without providing further details. Further, Rajapaksa also offered to permit Chinese tourists to return to Sri Lanka provided they adhered to strict Covid regulations. Subsequent to this announcement, Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal on 12 January stated that the Sri Lankan Government was presently in negotiations with China to obtain a loan to cushion the effect of the existing debt repayments to China. According to Cabraal, the Government’s strategy is to restructure the country’s debt structure in a manner that does not inflict pain on investors who kept faith in the country. Cabraal noted that the Government would implement its debt restructuring process while considering the interests of investors. China is Sri Lanka’s fourth biggest lender, behind international financial markets, the Asian Development Bank (ADB), and Japan. According to official data, China has lent Sri Lanka over $ 5 billion (£ 3.7 billion) in the last decade for projects including roads, an airport, and ports. Sri Lanka has also received billions of dollars of soft loans from China but the island nation has been engulfed in a foreign exchange crisis, which some analysts opine have pushed it to the verge of default.


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