The Aruna Sunday newspaper reported that China has informed Sri Lanka that it would like to forego the $9.95 billion loan installments owed to China in exchange for Sri Lanka’s Chinese projects that equal in value.
According to this newspaper, journalist Nayana Tharanga Gamage has obtained this information from diplomatic sources.
It is possible that the government agrees to this as a tactic to resolve the problem of Chinese debt, which has been a crucial issue in Sri Lanka’s economic crisis so far.
China does not agree to the restructuring of its loans given to Sri Lanka, meaning that they don’t want to extend the payback period. In this context, they have stated that they will take over Chinese projects in Sri Lanka instead of postponing loan payments. This means that China wants to take control over Sri Lanka’s ports, airports, international conference halls, stadiums, highways, power plants, the lotus tower, and many other constructions.
Among them are the Norochchole Power Plant, which is crucial to providing electricity to Sri Lanka, and the Mattala Airport.
Loans obtained for the construction of the Norochhole Plant amounted to 155 million dollars in the first phase, 300 million dollars in the second phase, and 891 million dollars in the third phase.
There is also a bunkering and tank farm project to provide fuel and LP gas to ships sailing near Sri Lanka.
Then there is the $214 million Moragahakanda development project and many other irrigation projects.
It is clear why China does not like to restructure the debt offered to Sri Lanka. In world politics, Sri Lanka shows clear allegiance to the camp aligned against China. The government of Sri Lanka is friendly with countries like India, the USA, European nations, and Japan. Ranil Wickremesinghe is now maintaining an evil rule, firmly suppressing protestors, knowing that these countries will still support him given his Chinese opposition.
China is not happy with Sri Lanka’s dealings with the IMF in addition to these diplomatic relations.
On the other hand, most of Sri Lanka’s loans have been obtained from China. Over 50 percent of Sri Lanka’s debt is Chinese debt. As a result, restructuring Chinese debt is crucial in stabilizing Sri Lanka’s debt, meaning that China should agree to extend the payback period of its loan installments. The International Monetary Fund has stated that it will not support Sri Lanka in the restructuring of IMF loans until its Chinese debt is restructured. As a result, it is difficult to find a solution to this crisis until negotiations with China are concluded clearly.
