No ‘political strings attached’ to China’s support for Sri Lanka: Xi tells Ranil

Sri Lanka must finalise a debt treatment plan with China and other creditors to become eligible for the next tranche of the IMF package

Sri Lankan President Ranil Wickremesinghe with his Chinese counterpart Xi Jinping in Beijing on Friday.

China will continue to assist Sri Lanka without any “political strings attached” and help the country cope with difficulties, President Xi Jinping told his Sri Lankan counterpart Ranil Wickremesinghe on Friday, according to an official statement, even as Colombo attempts to finalise a debt treatment plan with its creditors, including the Asian giant. 

Mr. Wickremesinghe is in Beijing for the third Belt and Road Forum for International Cooperation. Noting that Sri Lanka was among the first group of countries to join China’s ambitious connectivity project, President Xi said China would work with Sri Lanka to “jointly promote high-quality Belt and Road cooperation” and push for new progress in “developing China-Sri Lanka strategic cooperative partnership featuring sincere mutual assistance and lasting friendship.” 

The two sides pledged greater collaboration on international and regional affairs, oppose politicisation of the human rights issue and bloc confrontation, and safeguard the common interests of the two countries and developing countries, the official Chinese statement said. China has also expressed willingness to increase its imports from Sri Lanka and promote more Chinese investment in the island nation, statements issued by both sides said. 

Debt question 

Notably, a press statement from Mr. Wickremesinghe’s office mentioned Mr. Xi’s assurance of “friendly, practical and timely support for Sri Lanka’s debt optimisation programme,” but the statement from the Chinese side made no mention of debt owed by Sri Lanka, or an agreement on its treatment, as the island nation struggles to get out of its crushing economic meltdown.

All the same, a 19-point joint statement issued by the two governments later on Friday said China will continue to support its financial institutions in conducting “friendly consultation with Sri Lanka to reach early agreement” on debt treatment. “The Chinese side is willing to work with relevant countries and international financial institutions to keep playing a positive role in helping Sri Lanka address its current difficulties, alleviate debt burden, and realise sustainable development. Sri Lanka commended China for its support to Sri Lanka to ease financial difficulties,” it said.

Further, Sri Lanka “firmly supports and actively participates” in the Global Development Initiative (GDI), the Global Security Initiative (GSI), and the Global Civilization Initiative (GCI) proposed by China, according to the joint statement. Sri Lanka’s decision comes a month after Nepal declined to join Mr. Xi’s Global Security Initiative, when Prime Minister Pushpa Kamal Dahal Prachanda visited Beijing last month.

IMF stance

Meanwhile, the International Monetary Fund (IMF) on Friday said it reached a staff-level agreement with Sri Lanka, on economic policies to conclude the first review of its 48-month-long package. Following the IMF Executive Board’s approval, Sri Lanka will have access to about $330 million, its second tranche of the Extended Fund Facility from the Fund. 

Although macroeconomic policy reforms are “starting to bear fruit”, and the economy is showing “tentative signs” of stabilising, IMF Senior Mission Chief for Sri Lanka Peter Breuer told the media on Friday morning that approval from the Fund’s Executive Board is contingent on a “critical next step” of Sri Lanka securing an agreement with its official creditors on a debt treatment. “We have taken note of a tentative agreement between Sri Lanka and the Export-Import Bank of China and look forward to analysing the details when we receive them,” he said. 

On Thursday, President’s Wickremesinghe’s office said in a statement that Chinese Finance Minister Liu Kun reaffirmed Beijing’s commitment to extend “comprehensive support” for the implementation of a medium-term and long-term programme “mutually beneficial to both parties and aimed at optimising Sri Lanka’s debt.”  

Sri Lanka has been in talks with all its official creditors, including China, India, and Japan, who are its three largest bilateral lenders. While India, Japan, and France co-chair an “official creditor committee” backed by the Paris Club group of creditors, China opted to stay out of the platform, participating in its deliberations merely as a member. Sri Lanka has assured both India and Japan of creditor parity and transparency, which would mean that if Sri Lanka negotiates a moratorium, or a revision of its loans’ maturity period or interest rates, the terms would be the comparable for all creditors.