Crisis-stricken Sri Lanka should be able to conclude newly-launched debt restructuring talks by September, or November at the latest, its president said on Thursday, adding that the negotiations had made "remarkable" progress.
Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund in March but must set up a debt restructuring framework by September to carry forward the program, or risk undermining a slow economic recovery.
President Ranil Wickremesinghe's comment came as he began a meeting with Japanese Prime Minister Fumio Kishida at the latter's office in Tokyo, the capital.
"We have made remarkable headway as far as the debt restructuring talks are concerned," Wickremesinghe said. "We should be able to conclude by September, or November the latest."
Kishida's meeting with the Sri Lankan leader, their first since last September, is unlikely to generate a new initiative but both sides would take stock of the efforts to restructure debt, a Japanese official told Reuters.
Last month, France, India and Japan unveiled a common platform for talks among bilateral creditors to co-ordinate restructuring of the debt.
The island nation defaulted on its foreign debt for the first time in its history in April last year as the worst financial crisis since independence from Britain in 1948 crushed its economy.
The IMF called this week for timely restructuring pacts with the country's creditors. The global lender said Sri Lanka's macroeconomic situation was improving, although earlier it had predicted the economy would contract this year.
Sri Lanka owes $7.1 billion to its creditors, with $3 billion owed to China, $1.6 billion to India and $2.4 billion to the Paris Club, a group of creditor nations.
© Thomson Reuters 2023.
16 Comments
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Spitfire
Too little, too late.
Japan should have aided these countries 35 years ago when it was awash with cash and China wasn't much different than Sri Lanka today.
JJE
The BIG LIE when "debt trap" is wolf-whistled by the west about Chinese initiatives like the Belt & Road.
They actually are in more debt to the collective west and Japan. Moreover, the conditions are far less regressive. And these G7 goons have unashamedly been at it for years.
Meiyouwenti
Restructuring Sri Lanka’s huge foreign debt is fine if the country agrees to repatriate its citizens illegally living in Japan by overstaying their visas and abusing the asylum system.
Larr Flint
I don't think it is a good idea to listen to a country whose debt to GDP is 275%.
Sri Lank should turn to China.
Xavier
@Larr Flint
It did. But while other creditors like Japan were willing to restructure Sri Lanka's debt quickly and in a transparent manner, China's answer was for Sri Lanka to take on EVEN MORE debt from China to pay off the old debt, making the problem even worse.
Here's an overview of China's tactics, which make a bad situation much, much worse for the countries involved. Other countries should never borrow from China.
https://apnews.com/article/china-debt-banking-loans-financial-developing-countries-collapse-8df6f9fac3e1e758d0e6d8d5dfbd3ed6
Behind the scenes is China’s reluctance to forgive debt and its extreme secrecy about how much money it has loaned and on what terms, which has kept other major lenders from stepping in to help. On top of that is the recent discovery that borrowers have been required to put cash in hidden escrow accounts that push China to the front of the line of creditors to be paid.
JJE
The flawed debt-trap diplomacy theory is a meme that became popular due to negativity based on anxiety about the rise of China.
piskian
Kishida didn't get a chance to nip over to Sri Lanka on a trip?
Missed an omiyage opportunity there.
quercetum
I would say a Sri Lankan diplomat in Tokyo and his assessment of his country’s loans would carry more weight than articles linked in the comment section. Go directly to the source.
Xavier
@JJE
No, it's something that is very real, which became infamous due to China's repeated, and continued, use of it.
@quercetum
As ever, dismiss my sources all you like. I will continue to post them. They're not for you, as I know you're a lost cause.
Mark
This is what modern slavery looks like, Debt then arm twisting.
TaiwanIsNotChina
Apparently not:
https://japantoday.com/category/world/%27clock-has-hit-midnight%27-china-loans-pushing-world%E2%80%99s-poorest-countries-to-brink-of-collapse
Peter Neil
I don’t know about you folks, but I could use some debt restructuring to the tune of about $7.1 billion from the PM and IMF. Let’s meet? I’ll bring some little flags.
JeffLee
JJE
The Western debt is distinctly different. It's through private sector creditors. In a default, it's these investors who will have to take a haircut while SL could carry on although with a lowered credit rating. However, when countries like China lend to other countries, a whole set of harsh geopolitical factors can come into play, with the creditor demanding political concessions, posing serious risks to the lender's sovereignty.
Larr
If you read the story, it says "forgeign debt." Japan hardly has any of that, which is why it ain't going to default, or even raise its bond rates, unless it wants to.
TaiwanIsNotChina
Read some more about the secret loans China makes. The IMF and World Bank should make NO loans to a country if there is any remote possibility of there being a secret China loan that would take precedence/obscure the debt picture of the country. Perhaps there can also be clauses that double the interest rate of existing loans if secret China loans come to light.
elephant200
@TW There is already such measure from the IMF and still many countries swam to seek help from China. Pakistan is that kind of country. Many third world country just get up leave that IMF alone and talks with political friendly China. IMF or World bank were notorious with hateful attitude, it was an insult to discuss with them!
TaiwanIsNotChina
As long as it is all on China when the countries collapse. The World Food Programme will be working overtime.