COLOMBO: Sri Lanka is in search of $ 2.2 billion from Chinese language banks, authorities stated Thursday (February 25), echoing a borrowing spree greater than a decade in the past that pressured the nation to desert a strategic port to China.
Foreign money and Monetary Markets Minister Nivard Cabraal stated the federal government hopes to finalize a $ 1.5 billion swap facility with China’s central financial institution.
“Within the subsequent two weeks we should always be capable of finalize it,” Cabraal informed reporters in Colombo whereas saying the funds can be used as a “buffer” to satisfy the federal government’s international alternate wants.
Official figures present Sri Lanka’s international alternate reserves fell to $ 4.8 billion on the finish of January, the bottom since September 2009 once they fell to $ 4.2 billion.
Officers stated Sri Lanka was additionally in talks with the China Growth Financial institution for a US $ 700 million mortgage that would come with the equal of US $ 200 million drawn in Chinese language foreign money.
Beneath former President Mahinda Rajapaksa between 2005 and 2015, Colombo borrowed billions from China, racking up a mountain of debt for costly infrastructure tasks.
This sparked issues within the West and India that the strategically situated Indian Ocean nation fell sufferer to a Chinese language debt entice.
Mahinda Rajapaksa returned to energy as Prime Minister in 2019 after his brother Gotabaya Rajapaksa was elected president.
Sri Lanka was pressured to promote its strategic port of Hambantota on a 99-year lease to a Chinese language firm in 2017 after Colombo stated it was unable to repay Beijing’s US $ 1.4 billion debt used to construct it.
READ: Commentary: Sri Lanka’s debt downside didn’t come up in China
Three main worldwide score companies downgraded Sri Lanka’s creditworthiness late final yr after elevating doubts over Colombo’s capability to service its exterior debt.
The South Asian nation’s financial system is reeling from the double affect of the lethal 2019 Easter assaults that killed 279 individuals and devastated the tourism sector in addition to the fallout from the COVID-19 pandemic.
Cabraal insisted on Thursday that Sri Lanka would preserve its document of on-time debt reimbursement and stated credit score downgrades by worldwide companies have been “unwarranted”.
He stated Sri Lanka has already repaid $ 500 million this yr on its debt service dedication of $ 3.7 billion for calendar yr 2021.
He stated the federal government had imposed a ban on luxurious imports and a number of other different commodities in an try to preserve currencies so the nation might have sufficient arduous foreign money to repay its debt.
The Sri Lankan financial system contracted by a document 3.9% final yr.
Nonetheless, Cabraal stated financial exercise was choosing up and the nation estimated international inflows at US $ 32 billion towards outflows of US $ 27.6 billion this yr, leaving a surplus of US $ 4.4 billion. .