Sri Lanka’s debt to China nearly 20% of public external debt – study

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LONDON/JOHANNESBURG – Sri Lanka owed Chinese lenders $7.4 billion – almost a fifth of its public external debt – at the end of last year, according to calculations by the China Africa Research Initiative (CARI). published on Wednesday, a higher estimate than many others.

The figure was higher than the « often-cited 10-15% figures », according to the study, adding that a « significant part » of the country’s debt to China was recorded in loans to state-owned enterprises rather than to the government. central government.

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Crisis-hit Sri Lanka is in the midst of debt restructuring after years of economic mismanagement combined with the COVID-19 pandemic that have seen the country plunge into the worst economic crisis since independence from Great Britain. Brittany in 1948 and go into default.

Export-Import Bank of China (EximBank) and China Development Bank are China’s two largest lenders, accounting for $4.3 billion and $3 billion respectively, according to data collected by CARI at Johns Hopkins University School of Advanced International. Studies.

China is Sri Lanka’s largest bilateral creditor and, along with India and Japan, is part of talks with official creditors to restructure the country’s debt.

« China will have to play a major role in Sri Lanka’s debt restructuring process, » CARI researchers Umesh Moramudali and Thilina Panduwawala wrote in the report.

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The island nation began talks with bilateral creditors in September after securing a $2.9 billion staff-level deal with the International Monetary Fund. But the funding will not flow until the fund’s board approves the deal, a step that requires financial assurances from bilateral lenders.

Final talks originally expected earlier this month have been postponed, casting doubt on how quickly the debt reshuffle can progress.

The island nation’s total external debt is $37.6 billion, according to the report. Adding in central bank foreign currency debt, including a $1.6 billion currency swap with China, public external debt is $40.6 billion, 22% of which comes from Chinese creditors .

CARI’s total debt figure differs from the $46.6 billion count released by the government in September, as it excludes local hard-currency debt and loans to some state-owned enterprises.

The CARI study also identified six different loans granted to the deep water port of Hambantota by EximBank between 2007 and 2013 for approximately $1.3 billion. The loan agreements contain clauses that « subject the loans to applicable Chinese law and to arbitration before the China Commission for International Economic and Trade Arbitration ». (Reporting by Jorgelina do Rosario and Rachel Savage; editing by Karin Strohecker and Stephen Coates)