China confirms offer of two-year moratorium on loan repayments to Sri Lanka
China says offered two-year moratorium on loan repayments to Sri Lanka.
The government of China on Friday confirmed that a two-year moratorium is being offered to Sri Lanka on loan repayments as the island nation battles to restructure $51 billion in foreign debt amid the financial crisis.The loan was provided by China to Sri Lanka under the multibillion-dollar Belt and Road Initiative programme of Beijing aimed at increasing trade through the construction of ports and other infrastructure across Africa and Asia.
A $2.9 billion emergency loan was offered by the International Monetary Fund which also asked Colombo's other creditors to cut debts but this was resisted by Beijing which feared that its other borrowers too would demand similar reliefs.
ALSO READ | Bankrupt Sri Lanka to drastically slash military by half amid looming economic crisis
Foreign ministry spokesperson Mao Ning said that Beijing presented a plan to “provide an extension on debt service due in 2022 and 2023”.
“During that period, Sri Lanka would not have to pay the principal and interest due on bank loans,” he added.
China is the third-biggest creditor of Sri Lanka after Japan and the Asian Development Bank.The loans provided by China have been used by Sri Lanka for building an airport as well as other projectsthat lacked funds.
Last month, India announced that it gave assurance to IMF to facilitate a bailout plan. Sri Lanka was given $4.4 billion by India as emergency credit.
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In April last year, Sri Lanka's foreign currency was depleted which led to power cuts, food shortages and a breakout of massive protests that led to the ouster of the then president and prime minister.
Debt repayment to Japan, China and other foreign lenders was also suspended.
The government of Sri Lanka is currently cutting spending and has already announced the reduction of its 200,000-member military by almost half by 2030.
(With inputs from agencies)
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