ChEXIM to consider Sri Lanka’s debt restructuring based on economic interests
The Chinese Exim Bank (ChEXIM) is to consider the restructuring loans based on its economic interests but it is still to take a decision on the extension of the two-year moratorium granted to Sri Lanka till the end of this year.
This was revealed during closely guarded discussions held between Sri Lanka top level fiscal and monetary officials and China’s two policy banks’ high officials recently ahead of the first review of International Monetary Fund mission this week.
The two sides discussed the possibility of partially restructuring ChEXIM loans that are both concessional and commercial while leaving out all of China Development Bank (CDB)’s (commercial) loans without any restructure.
Chinese policy bank authorities have suggested to restructure debt of multilateral agencies including the World Bank and the International Monetary Fund (IMF).
Loans from ChEXIM to the government which had earlier been reclassified as debts of the Ceylon Electricity Board, Sri Lanka Ports Authority, and Airport and Aviation Services Sri Lanka, have been recognised as central government debt.
The majority of guaranteed forex debt of the Ceylon Petroleum Corporation has also been recognised as central government debt.
As a result, there is a possibility that China will allow the profit-seeking Chinese SOEs and policy banks to plan the way ahead in Sri Lanka,
The Chinese government is restructuring loans where it expects minimal economic and political costs.
ChEXIM has lent around US$4.3 billion to Sri Lanka. These lendings have largely been project-specific and have boosted the presence and activities of Chinese SOEs in the country.
On the other hand, CDB has lent around $3 billion to Sri Lanka. The bank began investing in Sri Lanka only in 2011, but its funds were limited in scope and extent.
In Sri Lanka, CDB focuses on refinancing loans, rather than project-specific funding, mainly acting as a balance of payment supporter.
In 2018, CDB offered Sri Lanka a funding facility of $1 billion. Similar facilities of $500 million and $700 million were provided in 2020 and 2021, official data shows.
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