China today (Feb. 03) confirmed that its Export-Import Bank is offering Sri Lanka a two-year moratorium on loan repayments.

Addressing a regular press conference, Chinese Foreign Ministry spokesperson Mao Ning said the EXIM Bank, as the official bilateral creditor, has provided a financing support document to Sri Lanka’s Ministry of Finance, Economic Stabilization and National Policies.

According to Mao Ning, the EXIM Bank will provide Sri Lanka with an extension on the debt service due in 2022 and 2023, which will help relieve the island’s short-term debt repayment pressure.

This means that Sri Lanka will not have to repay the principal and interest due of the Bank’s loans during the above-mentioned period, she added.

Speaking further the ministerial spokesperson, who stated that China’s EXIM Bank is willing to have friendly consultation with Sri Lanka regarding medium- and long-term debt treatment in this window period, also noted that the Bank would make best efforts to contribute to the debt sustainability of the island nation.

In the said document, the EXIM Bank has also reiterated its support for Sri Lanka in its loan application to the IMF. In the meantime, the Bank will continuously call on commercial creditors (including the International Sovereign Bondholders) to provide debt treatment in an equally comparable manner, and encourage multilateral creditors to do their utmost to make corresponding contributions, Mao Ning said further.

Further, she recalled the assistance provided by China, as a “friendly neighbor and true friend”, for Sri Lanka’s economic and social development to the best of its capabilities. The financing support document is aimed at combining an “immediate contingency measure” and “medium- and long-term debt treatment” to rapidly, effectively and truly resolve Sri Lanka’s debt issue.

“As far as I have learned, China is the first official bilateral creditor to have taken the initiative to announce debt extension to Sri Lanka. This speaks to China’s sincerity and action to support Sri Lanka’s effort to achieve debt sustainability.”

The Chinese official went on to call on all other creditors of Sri Lanka, especially multilateral creditors, to take synchronized, similar steps and give effective, strong support to Sri Lanka to help the country emerge from its default status at an early date and eventually work out an arrangement for Sri Lanka to achieve medium- and long-term debt sustainability.

China also urged the IMF to take into full consideration the urgency of the situation in Sri Lanka and provide loan support as soon as possible to relieve the country’s liquidity strain.

Mao Ning affirmed that going forward, China would continue to support relevant financial institutions in actively working out the debt treatment. “We will work with relevant countries and international financial institutions to jointly play a positive role in helping Sri Lanka navigate the situation, ease its debt burden and achieve sustainable development.”