Home New loan Sri Lanka discusses loan from China to cover past debts

Sri Lanka discusses loan from China to cover past debts

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FILE – Sri Lankan President Gotabaya Rajapaksa, left, and Chinese Foreign Minister Wang Yi arrive at the China-funded Port City sea rehabilitation project in Colombo, Sri Lanka January 9, 2022. The Sri Lankan government said on Tuesday it was considering getting another loan from Beijing to pay off some of its debt to Chinese banks after China told the near-bankrupt island nation it was not favorable to the restructuring of existing loans.Eranga Jayawardena/AP

COLOMBO, Sri Lanka (AP) — The Sri Lankan government said Tuesday it is considering getting another loan from Beijing to pay off some of its debt to Chinese banks after China told the island nation almost bankrupt that it was not in favor of restructuring existing loans.

Sri Lanka has nearly $7 billion in foreign debt to repay this year and will have to repay $25 billion over the next five years. A severe shortage of foreign currency means the country lacks money to buy imported goods, leading to shortages of food, fuel and other essentials.

The economic crisis has prompted weeks of protests across the country calling for the resignation of President Gotabaya Rajapaksa.


Government spokesman Nalaka Godahewa said Beijing was reluctant to restructure Sri Lanka’s debt because it did not want to set that precedent. He told reporters that the finance ministry would later announce details of talks with China.

Earlier this month, the government announced it was suspending foreign loan repayments pending negotiations with the International Monetary Fund for a loan restructuring plan.

Sri Lanka’s debt problems are partly because it has built infrastructure such as a port, airport and road networks using Chinese loans, but the projects are not bringing in money .

Rajapaksa had asked Chinese Foreign Minister Wang Yi, who visited Sri Lanka in January, to restructure these loans.

Central Bank figures show that existing Chinese loans to Sri Lanka total around $3.38 billion, not including loans to state-owned enterprises, which are counted separately and considered large.