China assures Sri Lanka of support in debt restructuring

Chinese Premier Li Qiang has extended support to Sri Lankan Prime Minister Dinesh Gunawardena in Colombo’s endeavor to restructure its debt, aiming to resuscitate its floundering economy.

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The assurance came during Gunawardena’s official visit to China, where he engaged in discussions with Premier Li in Beijing on Tuesday, as confirmed by a statement from the Sri Lankan Prime Minister’s office.

This diplomatic tête-à-tête culminated in the signing of nine new agreements between the two nations, although specifics of these pacts were not disclosed in the official statement. Notably, China holds the position of being Sri Lanka’s primary bilateral lender, with a substantial 52% share of the island nation’s USD 40 billion external debt, a significant backdrop to this recent show of support. This reassurance from China follows closely on the heels of the International Monetary Fund (IMF) concluding its second review of the USD 2.9 billion bailout package with Sri Lanka. The IMF emphasized the pivotal role of reaching agreements with Sri Lanka’s commercial creditors, including international bondholders and the China Development Bank, in achieving long-term debt sustainability.