Sri Lanka state finmin: Premature to comment on allegations towards China on financial assurances

ECONOMYNEXT – Sri Lanka’s State Finance Minister is of the view that it is premature to comment on China over its financial assurances which are mandatory for an International Monetary Fund (IMF) Board approval for a $2.9 billion loan.

 

Sri Lanka has so far got assurance in writing only from India while the members of Paris Club have also expressed their willingness for financial assurance verbally while China is expected to do the same in the near future.

 

Debt moratorium, hair cuts, and refinancing are some of the tools the creditors have discussed with the Sri Lankan government, officials who have direct knowledge say.

 

However, India and the United States have called Sri Lanka to ensure “equal treatment” for all its creditors. Sri Lankan officials say the call may be due to doubts that China does not want a haircut in its debt restructuring with Sri Lanka.

 

“It is premature to comment on allegations towards China before their assurances. From our point of view, we will be transparent and equitable to all creditors,” Minister Shahen Semasinghe told in an interview with EconomyNext on January 26.

 

“We received from India and we hope the Paris Club will assure us very soon. And from the Chinese part, we have partial. we have received the letter.”

 

“Whether those fall to the parameters of the IMF or not, it’s been assessed by the IMF.”

 

The IMF approval for a $2.9 billion loan depends on financial assurances from all Sri Lankan creditors. The approval was expected December last year, but it has been delayed due to delay in financial assurances from the island nation’s key creditors including India and China.

 

India’s assurance came only in mid January.

 

Semasinghe said the IMF approval is vital to unlock the sovereign debt defaulted nation despite hardships which are caused by higher taxes, lower consumption, hyperinflation, lower disposable income, higher interest rates, and job losses.

 

“We all know it’s a difficult period. IMF approvals are very vital for us because the economy’s in a critical stage. With the new government coming into power with the President, we have stabilized the economy to a greater extent, but not to the fullest potential the economy should do. There is stabilization in the economy,” Semasinghe said. (Colombo/Jan 30/2023)