Bankrupt Sri Lanka gets China’s tentative agreement on debt restructure

Sri Lanka on October 11 welcomed China’s tentative agreement to a debt restructure, as the island nation works to restore its ruined finances after suffering its worst-ever economic crisis.

Sri Lanka on October 11 welcomed China's tentative agreement to a debt restructure, as the island nation works to restore its ruined finances after suffering its worst-ever economic crisis.

The government defaulted on its $46 billion debt last year at a time when months of food and fuel shortages were making life a misery for Sri Lanka's 22 million people.

Beijing is the island's largest bilateral lender and its consent is needed for any proposal by Colombo to reorganise its finances.

Deputy Finance Minister Ranjith Siyambalapitiya said approval had now been granted by the state-owned Export-Import Bank of China, its official creditor. "China has issued their primary consent to restructure our debt," he said in a statement.

Chinese Foreign Ministry spokesman Wang Wenbin told reporters on Tuesday that the bank had "tentatively agreed" with Sri Lanka on its debt treatment in late September.

"We are also glad to see that other creditors are having discussions with Sri Lanka as well over solutions to its debt issue," he added. Neither party shared further details of the agreement.

China holds about 52% of the South Asian nation's bilateral credit, with Japan and India the next-biggest lenders. Beijing had in March given in-principle agreement to a restructure of its loans to Sri Lanka, the final major creditor to do so.