A visiting US diplomat on Sunday said Washington is ready to assist Sri Lanka with its debt restructuring process and reiterated that all the island nation’s creditors, including China must cooperate in this endeavour.
Earlier this month, Sri Lanka secured a staff-level agreement for a USD 2.9 billion bailout from the International Monetary Fund (IMF), even as the country has an arduous task to restructure its debt with its creditors.
All the Sri Lankan creditors, including China, have to agree to restructure their existing loans to the island nation before the IMF starts disbursing the loan.
“It is imperative that all of Sri Lanka’s creditors, notably the People’s Republic of China, cooperates in this process openly. When debt becomes unsustainable, as it has become in Sri Lanka, this cooperation could mean the difference between life or death, prosperity or poverty,” USAID Administrator Samantha Power said while addressing the press.
It is estimated that Sri Lanka owes debt payments of USD 2 billion this year to China, one of Sri Lanka’s biggest creditors.
Overall, China’s loans and investments in Sri Lanka were estimated to be more than USD 8 billion in the last few years.
But Beijing has not made a public commitment for debt relief assistance to Colombo so far.
China’s willingness to provide debt relief to Sri Lanka will be vital to accelerate the debt restructuring.
Meanwhile, Power said Washington wants the US-Sri Lanka relationship to becoming a strictly trade-related relationship, and not an aid-related relationship.
“We want to use our resources to unlock the potential that we know is there, without strings attached. And we think this is a really important moment in Sri Lanka for that same mindset of standing with our friends, no strings attached, and in the interest of economic independence and economic stability for this country,” she added.
During her two-day visit to the country, Power announced USD 60 million in aid to Sri Lanka, which includes a USD 40 million to buy fertilisers and other key agricultural inputs in time for the next cultivation season.
Sri Lanka, a country of 22 million, plunged into a political crisis in July, after former President Gotabaya Rajapaksa fled the country following a popular public uprising against his government for mismanaging the economy.
Rajapaksa was replaced by his ally Ranil Wickremesinghe.
In mid-April, Sri Lanka declared its international debt default due to the forex crisis.
The country owes USD 51 billion in foreign debt, of which USD 28 billion must be paid by 2027.
There have been street protests in Sri Lanka against the government since early April due to its mishandling of the economic crisis.
A crippling shortage of foreign reserves has led to long queues for fuel, cooking gas, and other essentials while power cuts and soaring food prices have heaped misery on the people.