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Sri Lanka in talks to secure $500 mn in Chinese loans

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On the heels of a high Chinese delegation’s go to to Sri Lanka, Colombo is negotiating a $500 million mortgage with Beijing, because it gears up to repay a frightening $4.5 billion of its excellent debt subsequent 12 months.

The Chinese Embassy tweeted on Sunday, “a $500 million concessional loan” requested by Sri Lanka’s Ministry of Finance to a “China financial institute” is below negotiation, however but to be finalised. This is in addition to Beijing’s $90 million grant to Sri Lanka, introduced days after a Chinese delegation led by Yang Jiechi, a high overseas coverage official in the Beijing administration. If sanctioned, the brand new mortgage would take Sri Lanka’s complete borrowings from China this 12 months over $1 billion, after the $500 million “urgent financial assistance” that Beijing prolonged to Colombo in March, to assist Sri Lanka address the financial affect of the pandemic.

The negotiations come at a time when Sri Lanka is mulling methods to repay its mounting overseas loans. State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal lately informed media that Sri Lanka is “exploring all options”, together with the $1 billion foreign money settlement with India — below negotiation — larger funding in the securities market, bonds, in addition to a $700 million syndicated mortgage from China.

Debt freeze

Diplomatic sources in Colombo informed The Hindu that the Sri Lankan authorities didn’t talk about a potential debt freeze in talks with China’s visiting officers, although Colombo had earlier indicated that it was contemplating making such a request. “The focus now is on possible investment from China, not just loans,” an official supply mentioned, a fortnight after U.S.-based credit standing company Moody’s downgraded Sri Lanka’s sovereign credit standing by two notches, to the “very high credit risk” class.

Prime Minister Mahinda Rajapaksa, throughout his go to to New Delhi in February, had sought a debt moratorium from India, to assist Sri Lanka sort out the debt reimbursement schedule. The request, together with President Gotabaya Rajapaksa’s request for a $1 billion foreign money swap facility, is “being discussed at the official level”, India mentioned, following Prime Minister Narendra Modi’s digital summit with PM Rajapaksa on September 26. India sanctioned a $15 million grant for the promotion of Buddhist cultural exchanges.

Theatre of geopolitics

Meanwhile, Sri Lanka is gearing up for yet one more seemingly “high-level visit” later this month, pointing to the heightened geopolitical curiosity in the strategically situated island nation. U.S. Secretary of State Mike Pompeo “is expected to come”, Foreign Secretary Admiral Jayanath Colombage informed the Sunday Times. While the U.S. Embassy right here informed The Hindu “no official visit has been confirmed at this time”, sources talked about October 27 because the seemingly date, across the time of the scheduled go to of Mr. Pompeo and U.S. Defence Secretary Mark Esper to India.

News of the go to assumes significance, coming a 12 months after Secretary Pompeo cancelled his scheduled go to to Sri Lanka. Though the Embassy cited “scheduling conflicts” as cause final June, the event coincided with appreciable resistance right here, to the then proposed ‘Visiting Forces Agreement’ (VFA) with the US. The Rajapaksa administration has additionally opposed the Millennium Challenge Corporation Agreement — for a $480 million grant — negotiated by the previous authorities.

Further, if Secretary Pompeo visits Sri Lanka, he can be coming weeks after attending the Australia-India-Japan-U.S. Quadrilateral (Quad) Foreign Minister’s assembly in Tokyo. Members of the Quad might be intently watching the Rajapaksa administration’s engagement with Beijing for extra causes than one. Last month, Sri Lanka ordered the termination of a $1.5-billion Japanese-funded gentle rail mission on grounds that it’s not a “cost-effective solution” for Colombo and elevating “environmental” issues. Moreover, the East Container Terminal in Colombo that India and Japan agreed to collectively develop with Sri Lanka final 12 months, has run into bother with staff opposing “foreign involvement” in “nationwide belongings.

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