China has affirmed its commitment to supporting Sri Lanka as the crisis-hit island nation’s prime minister concluded a visit to Beijing aimed at finalizing a debt restructuring agreement.
Prime Minister Dinesh Gunawardena arrived in China on Monday, where he met with President Xi Jinping and attended the Boao Forum, a prominent international gathering.
During Gunawardena’s visit, discussions centered on Sri Lanka’s ongoing economic challenges, with China holding approximately 10 percent of the country’s total foreign debt.
According to a joint bilateral statement released on Friday, China expressed its willingness to continue supporting its financial institutions in actively negotiating with Sri Lanka. Beijing also pledged to maintain friendly communication with other creditors and play a constructive role in assisting Sri Lanka with financial relief.
Both parties agreed to exert maximum efforts to advance the Port City Colombo and Hambantota Development Project, aiming to transform them into flagship initiatives of the Sino-Sri Lankan joint construction under the Belt and Road initiative.
Hambantota port, once considered a white-elephant project initiated by former president Mahinda Rajapaksa, has been subject to scrutiny for its heavy borrowing from China. Sri Lanka, unable to repay a substantial loan acquired from China in 2017 for the port’s construction, handed it over to the state-owned China Merchants Group on a 99-year lease for $1.12 billion.
Sri Lanka faced a significant economic downturn, defaulting on its $46 billion external debt in April 2022 due to a shortage of foreign exchange to finance essential imports such as food, fuel, and medicine. In response, the country secured a $2.9 billion bailout from the International Monetary Fund (IMF) last year, contingent upon reaching a debt agreement that satisfies foreign creditors.
While China had tentatively agreed to restructure Sri Lanka’s debt in December, the details of the arrangement have yet to be finalized by both parties. Sri Lanka’s government had initially aimed to conclude the foreign debt restructuring by early April.
