China must be treated as equal Sri Lanka creditor: India to IMF, World Bank

China must be treated just like any other creditor once talks begin to restructure Sri Lanka’s debt, India’s Finance Minister Nirmala Sitharaman said she told the International Monetary Fund and World Bank.
 

“All creditors must be treated equally and with transparency,” Sitharaman said in an interview in Washington Friday. “I’ve emphasized that point in general and in the context of Sri Lanka.”

China Ready to Offer Sri Lanka ‘Urgently Needed Help’

Sri Lanka was looking to borrow $1 billion from Beijing so that it can repay existing Chinese loans due in July, as well as a $1.5 billion credit line to purchase goods. The South Asian nation, which is running out of dollars to pay for imports, is also seeking aid from neighbor India, the World Bank and the IMF.

Sitharaman said she has also requested the IMF consider rapid aid for middle income-classified Sri Lanka -- typically given only to low-income countries -- as the pandemic has destroyed the island’s tourism revenue.

With foreign-exchange earnings plunging, Sri Lanka struggled to manage its external debt, which had grown in part due to loans from China to fund ambitious infrastructure projects. Sri Lanka had about $3.5 billion in debt from China by end-2020, excluding loans to state enterprises, according to central bank data. 

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This year, it also has to pay $2.2 billion of principal and interest payments for dollar-denominated bonds and loans, with the number rising to about $2.7 billion annually in both 2023 and 2024, available data compiled by Bloomberg show.