Sri Lankan President Gotabaya Rajapaksa raises issue of debt crisis with Chinese Foreign Minister Wang Yi

Sri Lankan President Gotabaya Rajapaksa with Chinese Foreign Minister Wang Yi. Twitter@GotabayaR

Dove: Sri Lankan President Gotabaya Rajapaksa discussed with Chinese Foreign Minister Wang Yi on Sunday whether Beijing could help his country overcome the currency crisis by rescheduling its foreign debt.

He raised the issue when Wang, who arrived here Saturday from the Maldives for a two-day visit, called him at the presidential secretariat here.

According to a statement released by the president’s office.

Sri Lanka is estimated to owe debt payments to China in the region of $1.5 billion to $2 billion this year.

International rating agencies have expressed doubts over the island nation’s ability to meet its $1.5 trillion international sovereign obligations, the first $500 million of which will fall for payment next week.

The President of Lanka also said that if a concessional trade credit system could be obtained for imports from China, it would allow industries to operate smoothly.

Wang’s visit comes at a time when Sri Lanka is facing its worst currency crisis ever.
By December, the reserve position had fallen to just one month of imports or just over $1 billion.

However, at the end of the year, the Central Bank announced that the reserve position had improved and that cash realization would come from a previously agreed currency swap with China.

In recent months, the public has experienced a shortage of many basic necessities due to the currency crisis.
Import restrictions to save money have threatened the supply of cooking gas and fuel in addition to impending power cuts.

With the completion of a China currency swap, reserves reached $3 billion at the end of last year.

China is one of the biggest investors in various infrastructure projects in Sri Lanka. But there has been criticism, both locally and internationally, and growing concerns that China has lured Sri Lanka into a debt trap.

The previous government Maithripala Sirisena handed over the port of Hambantota to a Chinese state-owned company in 2017 on a 99-year lease in exchange for $1.2 billion in debt.

There have been global concerns about debt traps and China’s regional hegemony using its Belt and Road (BRI) infrastructure projects.

China is doling out huge sums of money for infrastructure projects in countries ranging from Asia to Africa and Europe. The previous US administration of Donald Trump had been extremely critical of the BRI and opined that China’s “predatory financing” left small counties under huge debt putting their sovereignty at risk.

Wang’s visit also marks the 65th anniversary of diplomatic relations between the two nations and the 70th anniversary of the Lanka-China Rubber and Rice Pact.

Signed in 1952, the Rubber-Rice Pact was a trade agreement between Lanka and China under which Colombo supplied rubber to Beijing in exchange for rice, leading to the establishment of diplomatic relations and the expansion of trade between the two nations.

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