Sri Lanka is turning to its China for a financial lifeline in curing the ailing economy and a balance of payment crisis emerging over the massive debt situation
Wide budget deficits running up to over Rs. 800 billion this year and more than Rs.1 trillion in the next year are likely to require at least partial foreign financing, which is extremely difficult to gain amidst the COVID-19 crisis, economic experts said.
Sri Lanka is expecting a $700 million loan from China and Samurai and Panda bonds to boost dollar inflows in 2020..
Discussions are underway with China to obtain a loan facility of US$ 700 million, state minister of finance Ajith Nivard Cabraal has said.
The state minister noted that discussions have been going on for a long time with the China Development Bank about the matter.
Yang Jiechi the Director of China’s Foreign Affairs Commission, following a recent tour to Sri Lanka, announced China would offer USD 90 million as an aid.
China stated that the money will be used to improve the health and education sectors in rural areas.
The aid was extended while Sri Lanka was in discussion with China to obtain a loan of USD 1.2 billion. China has already provided USD 500 million out of this amount to Sri Lanka.
An Agreement on Economic and Technical Cooperation was signed between the Government of China and Sri Lanka, providing 600 million RMB yuan (LKR 16.5 billion/USD 90 million) in grant assistance,
Calling the financial assistance a “timely grant,” the Chinese Embassy in Colombo said that it would be used for medical care, education and water supplies in Sri Lanka’s rural areas. and that it would “contribute to the well-being of (Sri Lankans) in a post-COVID era.”
Wide budget deficits running up to over Rs. 800 billion this year and more than Rs.1 trillion in the next year are likely to require at least partial foreign financing, which is extremely difficult to gain amidst the COVID-19 crisis, economic experts said.
The next ISB repayment of $1 billion is due in July 2021, said State Minister of Finance, Ajith Nivard Cabraal adding that the government will be able to raise necessary funds from the domestic and foreign markets.
Finance Ministry plans to raise Rs.1.5 trillion by issuing treasury bonds and bills, Rs.100 billion via Sri Lanka Development bonds, Rs.75 billion in Foreign Currency Banking Units (FCBU) while seeking financial assistance from international lending agencies such as the World Bank and the ADB.
The Government has no intention of seeking funds through the International Monetary Fund’s (IMF) Rapid Financing Instrument (RFI), as debt servicing has been effectively managed, Mr. Cabraal added
(LIN)