Sri Lanka appeals to China to ease debt burden amid economic crisis

Sri Lanka -Sri Lanka appealed to reschedule its huge Chinese debt burden to China’s foreign minister Wang Yi on Sunday. President of Sri Lanka Gotabaya Rajapaksa made the request during a meeting with Wang Yi.

In the last decade, China lent Sri Lanka over $5bn (£3.7bn) for projects including construction work, roads, an airport, and ports. However, Sri Lanka is facing an economic crisis due to the Covid-19 pandemic. Gotabaya Rajapaksa requested the Chinese foreign minister to restructure its debt because of the economic crisis.

China-Sri Lanka relation

Before the Covid-19 pandemic, China was Sri Lanka’s main source of tourists. The country used to earn a lot of money because of the tourists. Sri Lanka also imported more goods from China than from any other country. Reportedly, Wang’s visit came after a warning from international rating agencies that Sri Lanka’s government could be on the brink of an economic crisis.

In recent months, Sri Lanka had experienced a severe debt and foreign exchange crisis. The loss of tourist income during the pandemic affected the economy the most. According to The Guardian, Sri Lanka’s foreign reserves dropped to just $1.5bn at the end of November. The reserve was only enough to pay for about a month’s worth of imports. According to government data, China accounted for about 10% of Sri Lanka’s $35bn foreign debt by April 2021.

Coronavirus pandemic affected Sri Lanka

Sri Lanka has to repay about $4.5bn in debt in 2022 starting with a $500m international sovereign bond, which matures on 18 January. The country is also affected by job and earning losses, high food inflation and dwindling finances. According to the World Bank’s Sri Lanka Development Update (SLDU), people living under the poverty line likely increased by 11.7 percent or by over half a million people since the beginning of the Coronavirus pandemic.