Discussions with China underway to resolve economic crisis

USD 2.5 bn funding:

Amb Zhenhong silent on IMF intervention

By Shamindra Ferdinando

The cash-strapped Sri Lankan government is negotiating with China for funds amounting to USD 2.5 bn in addition to USD 2.8 bn obtained since the global epidemic Covid-19 eruption in early 2020.

Chinese Ambassador Qi Zhenhong disclosed Sri Lanka’s request at the onset of a media briefing held at the Kingsbury Hotel in Colombo yesterday (21).

The disclosure was made close on the heels of the finalisation of USD 1 bn loan facility provided by India and President Gotabaya Rajapaksa’s declaration of his readiness to seek IMF assistance. Amb. Zhenhong declined to comment on Sri Lanka’s decision to resume negotiations with the IMF.

Sri Lanka announced plans for talks with the IMF in the wake of an increase in prices of all essential items and services following the floating of the Rupee in the first week of March.

Amb. Zhenhong said that China recently received requests for USD 1 billion financing facility and USD 1.5 bn buyer’s credit. The Chinese envoy declared: “We understand the urgency in Sri Lanka’s need. Relevant authorities are studying the request.”

In spite of repeated questions, Amb Zhenhong refrained from going into details, including Sri Lanka’s specific needs while reiterating their commitment to help a friendly country.

Zhenhong presented his credentials to President Gotabaya Rajapaksa in mid Nov 2020 at the height of the first Covid-19 wave.

At the commencement of the briefing attended by local and Colombo based international media, Amb. Zhenhong said a range of events and activities conducted so far this year to mark 65th anniversary of China-Sri Lanka diplomatic relations and the 70th anniversary of the Rubber-Rice pact.

Responding to a query raised by Reuters, Amb Zhenhong said that USD 1 bn term financing facility had been provided on March 18, 2020 and April 12, 2020 (USD 500 mn each) with maturity period of 10 years. That was followed by CNY 2 bn (approximately USD 300 mn) term financing facility provided on Aug. 17, 2021, Amb Zhenhong said, adding CNY 10 bn (approximately USD1.5 bn) bilateral currency SWAP agreement was finalized in March 2021.

The Chinese envoy sidestepped a specific query on President Gotabaya Rajapaksa’s request to restructure debt repayments to overcome the financial crisis.

President Rajapaksa made the request during a meeting with Chinese Foreign Minister Wang Yi in early January this year.

New requests for USD 2.5 bn (USD 1 bn financing facility and USD 1.5 bn buyer’s credit) are believed to have been made following the Chinese Foreign Minister’s high profile visit.

Asked whether India has overtaken China in providing assistance and investments here, Amb Zhenhong listed Chinese loans and investments while asserting consistency, scale and comprehensiveness in their role.  The Chinese envoy didn’t respond to the query on Finance Minister Basil Rajapaksa being too close to India and pursuing an agenda at the expense of Beijing.

Amb Zhenhong dismissed assertions that the failure on the part of the Colombo Port City to attract investments and concerns over proposed Free Trade Agreement (FTA) between China and Sri Lanka. Amb Zhenhong assured: “We’ll never take advantage of FTA with Sri Lanka.” The Chinese envoy said so when the media queried the absence of a draft of FTA and serious concerns over its content against the backdrop of the previous Sri Lanka administration finalizing FTA with Singapore under controversial circumstances.

Amb Zhenhong said that the experts of both sides could handle the issues at hand.

Amb Zhenhong said that in spite of Covid-19 eruption China sustained its projects here with over 11,000 locals hired. Referring to major Chinese projects underway here namely Colombo Port City, Colombo International Container Terminals (CICT) and Hambantota International Port (HIP), Amb Zhenhong emphasized their ventures were on track.

The envoy questioned the unexplained suspension of ADB funded power projects in the North while declining to respond to questions regarding the status of them. The Chinese envoy advised that such an attitude on Sri Lanka’s part would be inimical to ongoing efforts to attract foreign investment.

The Chinese envoy avoided responding to queries regarding growing Indian presence in the Northern and Eastern Provinces of Sri Lanka and instances of India objecting to Chinese taking up projects. However, Amb Zhenhong explained the projects undertaken by China in Tamil dominated region, investments and grants made in support of the civilian community there.