Jan 9, 2022: According to a report by Reuters, Sri Lankan President Gotabhaya Raja Pakse has called on China to help restructure debt repayments to help the South Asian nation cope with a worsening financial crisis, his office said in a statement on Sunday.

Raja Paksa made the request during a meeting with Chinese Foreign Minister Wang Yi in Colombo on Sunday. Sri Lanka has benefited from billions of dollars in soft loans from China, but according to analysts, the island nation is currently facing a foreign exchange crisis.

“The president pointed out that it would be a great relief to the country if attention could be paid on restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the COVID-19 pandemic,” Rajapaksa’s office said in the statement.

China is Sri Lanka’s fourth largest lender, behind international financial markets, the Asian Development Bank (ADB) and Japan. Over the past decade, China has lent more than 5 billion to Sri Lanka for highways, ports, an airport and a coal power plant. But critics allege that the funds were used for white elephant projects with low profits, which China denies.

The statement said Raja Paksa also asked China to provide “concessional terms” for its exports to Sri Lanka, amounting to about ً 3.5 billion in 2020, but did not provide further details. Raja Paksa also proposed to allow Chinese tourists to return to Sri Lanka, provided they adhere to strict COVID restrictions, including staying only in pre-approved hotels and visiting only certain tourist attractions.

Prior to the pandemic, China was Sri Lanka’s largest tourist destination and the island imported more goods from China than any other country. Sri Lanka is a key part of China’s Belt and Road Initiative (BRI), a long-term plan to fund and build the infrastructure that connects China to the rest of the world, but which other countries, including the United States, have Named “Debt Trap”.

A $1.5 billion yuan swap from China helped the island boost its reserves to $3.1 billion at the end of December. Sri Lanka’s central bank has repeatedly assured all debt repayments will be met and said funds for the January ISB has already been allocated.

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