As the prime minister of the crisis-ridden island nation concluded his visit to Beijing on Saturday in an attempt to finalize a debt restructuring agreement, China declared that it will keep up its support for Sri Lanka.
Arriving in China on Monday, Prime Minister Dinesh Gunawardena’s tour includes meetings with President Xi Jinping and an attendance at the Boao Forum, a prominent international gathering.
During Gunawardena’s visit, the long-running economic crisis in Sri Lanka was a major topic of discussion. China is responsible for almost 10% of the South Asian nation’s total foreign debt.
China is willing to “continue supporting its financial institutions to actively negotiate with Sri Lanka, maintain friendly communication with other creditors, play a positive role in the International Monetary Fund, assist Sri Lanka in financial relief,” Beijing’s foreign ministry said in the Chinese version of a joint bilateral statement released Friday.
Referring to Xi’s massive global infrastructure initiative, the statement said that the two sides had agreed to “make every effort to promote the Port City Colombo and Hambantota Development Project, turning them into flagship projects of the Sino-Sri Lankan joint construction of the ‘Belt and Road'”.
Under previous President Mahinda Rajapaksa’s 10-year administration till 2015, the southern sea port of Hambantota was one of the country’s “white elephant” projects.
For projects that many criticized as a debt trap that precipitated the biggest economic disaster in Sri Lankan history, Rajapaksa borrowed significantly from China.
Unable to repay a huge loan taken from China in 2017 to build Hambantota port, Sri Lanka handed it over to the state-owned China Merchants Group for $1.12 billion on a 99-year lease.
Sri Lanka defaulted on its $46 billion external debt in April 2022 after it ran out of foreign exchange to finance even essential imports such as food, fuel and medicine.
It secured a $2.9 billion International Monetary Fund (IMF) bailout last year, with the programme conditional on a debt deal that satisfies foreign creditors.
In December, Beijing and Colombo had agreed “in principle” to restructure Sri Lanka’s debt, but they had not finalized the arrangement and neither had provided any details.
The government of Sri Lanka declared in January that a restructuring of the country’s foreign debt would be completed by the start of April.
