China’s Debt Moratorium Offer to Sri Lanka Falls Short for IMF Approval, Says Report
In a recent development, China’s gesture of a two-year debt moratorium towards Sri Lanka has been deemed insufficient by the International Monetary Fund (IMF) to proceed with a financial support package, as reported by Daily Mirror citing diplomatic sources.
According to the report, the IMF requires further assurances from China before approving a bailout package for the financially strapped South Asian nation. China’s Foreign Ministry previously announced that the Export-Import Bank of China (EXIM) had proposed a two-year moratorium on debt to Sri Lanka. This move was described as an effort to aid Sri Lanka in securing a USD 2.9 billion loan from the IMF.
However, some diplomatic sources highlighted to Daily Mirror that the IMF finds the moratorium offer lacking. The unfolding scenario draws attention as other major creditor nations and groups, such as the Paris Club, have been making arrangements on Sri Lanka’s debt situation. Last month, the Paris Club agreed to recommend a 10-year moratorium coupled with a 15-year debt restructuring plan for Sri Lanka to mitigate the risks of economic and financial turmoil.
Amid these international financial negotiations, India has stepped forward with financing assurances to the IMF, paving the way for Sri Lanka’s recovery path. India, alongside Japan and China, stand as Sri Lanka’s principal creditors. During a visit to Sri Lanka, External Affairs Minister S. Jaishankar confirmed India’s support and the provision of IMF financing assurances to aid in Sri Lanka’s recovery process.
“Recognizing the evolving critical situation, India took a proactive stance not to defer actions but to undertake what is deemed necessary,” Jaishankar remarked. “By extending financing assurances to the IMF, India aims to facilitate Sri Lanka’s progress and advocate for equitable treatment among all bilateral creditors.”
Furthermore, Jaishankar emphasized India’s solidarity with Sri Lanka through his official statements made in Colombo. He highlighted India’s contribution of approximately USD 4 billion in credits and debt rollovers to assist Sri Lanka amidst its economic turmoil. Jaishankar mentioned the “Neighbourhood First” policy underscoring the commitment to not leaving a partner in distress.
He also expressed India’s intent to encourage more investments in the Sri Lankan economy, focusing on vital sectors such as energy, tourism, and infrastructure, aiming to bolster economic recovery and stability in the region.
This scenario underscores the intricate dynamics of international debt diplomacy and the critical role that creditor assurances play in enabling nations like Sri Lanka to navigate through financial crises with the support of institutions like the IMF.
With ongoing dialogues and negotiations among creditors and financial institutions, the global community watches closely, hoping for a sustainable recovery plan for Sri Lanka that aligns with the interests and welfare of its people.
