Another senior U.S. diplomat has accused China of not doing enough to resolve Sri Lanka’s debt renegotiation, a sign that the island’s financial crisis is increasingly being framed geopolitically.
U.S. Under Secretary of State for Political Affairs, Victoria Nuland said: “What China has offered so far is not enough. We need to see credible and specific assurances that they will meet the IMF standard of debt relief.”
This comes after the U.S. ambassador to Colombo, Julie Chung, drew an angry response from Beijing in January when she called China a potential ‘spoiler’ in IMF attempts to lift Sri Lanka out of its worst economic crisis since independence.
Nuland reiterated the theme: “We, the United States, are prepared to do our part. Our Paris Club partners are prepared to do their part. India has made strong commitments that it will provide the credible assurances the IMF is looking for.”
While major bilateral lenders agreed to a 10-year repayment moratorium with an additional 15 years of debt restructuring, China Exim Bank has so far only offered to halt repayment pressure for two to three years. An IMF rescue deal partly depends on a uniform approach from bilateral lenders.
Another problem is that the Exim Bank only accounts for about half of Sri Lanka’s total debt to Chinese lenders. China Development Bank also holds a significant portion, and Beijing tends to see CDB debt as commercial. How this will be resolved remains unsure.
This isn’t only a China problem. Nuland didn’t mention another unresolved issue: the fact that the largest portion of Sri Lanka’s debt is to commercial lenders (many based in the U.S.)
WHY IS THIS IMPORTANT? Nuland’s comments (and the inevitable Chinese pushback – watch this space) risks the restructuring process being dragged out by geopolitics, even as Sri Lanka is running out of foreign exchange reserves.
SUGGESTED READING:
- Reuters: China has not done enough on Sri Lanka debt restructuring – U.S. diplomat by Uditha Jayasinghe
- News First: All eyes are on China & what they have offered is not enough, says Nuland by Zulfick Farzan
