Sri Lanka is suffering from its worst economic breakdown. The island nation is in talks with China, one of the largest foreign creditors for an Emergency aid package.
Sri Lanka was under massive crisis with over 100 days of protests, witnessing overthrowing of former President Gotabaya Rajapaksa. Ranil Wickremesinghe, subsequently, was elected as the new President, while Dinesh Gunawardena was sworn in as the new Prime Minister.Â
The island nation, and its 22 million people, are suffering from the worst economic situation since independence. The economy is out of foreign reserves, fuels, food, and even medicines. The protestors are angry about the shortages of basic amenities, with added increasing inflation.
Sri Lanka asked for help in trade, tourism, and investments, from China. Colombo’s Ambassador to Beijing, Palitha Kohona, is negotiating for a $4 billion emergency package to support Sri Lanka to emerge out of the economic crisis.
Ambassador Kohona has emphasized China as a key to economic recovery. China holds around 10% of Sri Lanka’s external debt. China, along with Japan, is the two largest foreign creditors to the island nations.
Reuters did an exclusive interview at Sri Lanka’s Beijing embassy and here’s what happened in the interview.
What Sri Lanka Wants from China:
Sri Lanka wants Chinese companies to purchase Sri Lankan black tea, spices, sapphire, and garments. Also, it wants China to make more transparent import rules, which are easy to navigate.
China can pour more investments into China-backed port projects of Hambantota and Colombo. Most of the Chinese investment plans were not executed because of the Covid19 pandemic.
The Chinese tourist footfall of 265,000 in 2018 had reduced to almost zero in the wake of 2019’s suicide attacks and then the pandemic. Sri Lanka would like to see a jump in Chinese tourists.
The newly elected President, Ranil Wickremesinghe, is looking forward to visiting China for a discussion on cooperation in tourism, trade, and investment. He had earlier visited China in 2016 as the Prime Minister.
Sri Lanka is also looking forward to buying fertilizers, fuels, and other needed supplies from China.
Kohona expects no changes towards China in the policies of the new government.
According to him, China’s role as a major global creditor and financial exposure to many other countries, is adding to the difficulty of taking quick decisions for Sri Lanka.
“Maybe if it was only Sri Lanka, then the decision-making would’ve been much easier.” – Kohona.
Kohona stated that the discussions on financial aid from China are still underway.
The $4 Billion Aid Package:
For several months now, Sri Lanka is negotiating an aid package of $4 billion from China. It would consist of a $1 billion loan to reply to Chinese debt due in the current year. It will also include a $1.5 billion credit line to make payments for Chinese imports. It also hopes to active a $ 1.5 billion currency swap between the nations.
Chinese foreign ministry stated this month that Beijing is willing to ‘play a positive role’ to help Sri Lanka, along with other countries and international financial institutions. In April and May, China pledged 500 million yuan’s emergency support for Sri Lanka.
India’s recent reactions to the Sri Lankan crisis:
Gopal Baglay, India’s High Commissioner to Sri Lanka recently stated that New Delhi will work with the new Sri Lankan government to support talks for a bailout package from IMF. India is planning for heavy investments, in both public as well as private sectors. The investments will be in newer segments like renewable energy, ports, infrastructure, IT, and hydrocarbons, among others. India and Sri Lanka are looking to the signing of the Economic and Technological Co-operation Agreement, which has been pending for a long time.
