As Taiwan Newtalk said on June 6, Sri Lanka is currently in a serious economic crisis; President Gotabaya Rajapaksa wants China to help with the debt burden. Speaking at a press conference on June 8, the Chinese Foreign Ministry made remarks regarding Sri Lanka’s request.
Foreign Ministry Spokesperson Zhao Lijian said that after the Sri Lankan government had terminated international debt payments, China contacted Sri Lanka. China then helped Sri Lanka in finding a proper way to handle the matured debts related to China.
Zhao added, “We hope Sri Lanka will work actively with China in a similar spirit and work out a feasible solution expeditiously.”
In an interview with Bloomberg earlier this week, President Rajapaksa said his country couldn’t tap a $1.5 billion from the Beijing credit line and that the country has yet to receive a response to its request for a USD 1 billion loan.
According to president Rajapaksa, even though China indicated that it would help Sri Lanka, Beijing added that “usually they don’t like” people lending more money to pay off old debts.
Rajapaksa added that China has shifted its strategic focus into Southeast Asia. It’s because China has more strategic interest in the Philippines, Vietnam and Cambodia, and Africa.
Rajapaksa said, “They have less interest in this region.”
China has announced it would help Sri Lanka with about $74 million for the supply of the essential goods but didn’t respond to President Rajapaksa’s request to defer the loan repayment, including the earlier proposal for a $2.5 billion loan facility for Colombo.
As the media site put it, the Chinese Belt and Road program is criticized as a debt trap; the building projects funded by Beijing are not profitable and are plunging the economy into crisis.
Sri Lanka is on the verge of bankruptcy, with its foreign exchange reserves having plummeted by 70% in the last two years. As a result, the country is unable to pay for essential imports.
Significantly, both Sri Lanka and Pakistan governments are seeking IMF bailout packages to survive over the economic crisis.