‘Sri Lanka in talks with China for $2.5bn credit support’

COLOMBO: China is considering offering a $1.5 billion credit facility to Sri Lanka and a decision is expected soon, a top Chinese official said on Monday, as part of efforts to help the island nation amid its worst economic crisis in decades.

Chinese ambassador to Sri Lanka Qi Zhenhong told reporters the two sides were also discussing a separate loan of up to $1 billion which the Sri Lankan government had requested, a British wire service reported.

He added that the South Asian nation was offered a loan of $500 million from the China Development Bank on March 18.

Sri Lanka has to repay about $4 billion worth of debt this year, including a $1 billion international sovereign bond maturing in July. But its reserves dipped to $2.31 billion as of end February, down around 70% from two years ago.

The country is also struggling to make payments for imports of essentials such as fuel and medicines and enforcing nationwide power cuts due to a lack of fuel for power generation.

“We believe our ultimate goal is to solve the problem but there may be different ways to do so,” Qi said in response to questions on possible restructuring of the Chinese loans.

China is Sri Lanka’s fourth biggest lender, behind international financial markets, the Asian Development Bank (ADB) and Japan.

Over the last decade China has lent Sri Lanka more than $5 billion for the construction of highways, ports, an airport and a coal power plant. But critics say the funds were used for white elephant projects with low returns, which China has denied.

President Gotabaya Rajapaksa asked China to help restructure debt repayments when he met Chinese Foreign Minister Wang Yi in January, but China is yet to respond to the request. the world.