China Continues Support for Sri Lanka Amid Debt Crisis
China has reaffirmed its commitment to supporting Sri Lanka as the island nation grapples with a severe economic crisis. Sri Lankan Prime Minister Dinesh Gunawardena recently concluded a visit to Beijing aimed at finalizing a debt restructuring deal.
High-Level Meetings and Discussions
During his visit, Prime Minister Gunawardena met with Chinese President Xi Jinping and participated in the Boao Forum for Asia, a prestigious international conference held in Hainan province. The discussions focused on addressing Sri Lanka’s long-standing economic challenges, with China being a significant creditor, accounting for approximately 10 percent of the country’s total foreign debt.
China’s Commitment to Support
In a joint bilateral statement, China expressed its willingness to support Sri Lanka by encouraging its financial institutions to engage in constructive negotiations, maintain open communication with other creditors, and actively participate in international financial forums such as the International Monetary Fund. Beijing emphasized its commitment to assisting Sri Lanka in achieving financial stability and relief.
Key Projects and Initiatives
Both countries agreed to prioritize the development of the Colombo Port City and Hambantota Development Project, aiming to elevate them as flagship initiatives under the Belt and Road framework. The Hambantota port, previously criticized as a costly venture, was handed over to China Merchants Group on a long-term lease in a bid to address Sri Lanka’s debt obligations.
Sri Lanka, which defaulted on its external debt in 2022, secured a bailout from the IMF, contingent on reaching a sustainable debt restructuring agreement with its creditors. While China has signaled its intent to restructure Sri Lanka’s debt, the final terms of the agreement are yet to be formalized.
The Sri Lankan government has set a deadline for finalizing the debt restructuring plan by early April, underscoring the urgency of resolving the country’s financial challenges through collaborative efforts with international partners.