The ailing Sri Lanka tried in talks with guest foreign minister Wang Yi on Sunday to reschedule its enormous Chinese debt, the president’s office said.
The island’s tourism-dependent economy has been weakened by the pandemic and its depleted foreign currency reserves have resulted in food rationing in supermarkets and a shortage of essentials.
Its main ally, China, is Sri Lanka’s largest bilateral lender, and Wang’s visit came after international rating agencies warned that President Gotabaya Rajapaksa’s government could be on the verge of default.
“The president indicated that it would be a great relief if debt payments could be postponed amid the post-pandemic economic crisis,” a statement from the Rajapaksa office said.
There was no immediate response from the Chinese embassy in Colombo.
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Sri Lanka’s foreign exchange reserves had plummeted to just $ 1.5 billion by the end of November – enough to pay for only about a month’s worth of imports.
The island’s largest utility began rationing electricity on Friday after running out of foreign currency to import oil for its thermal generators.
China accounted for about 10 percent of Sri Lanka’s $ 35 billion foreign debt by April 2021, government data shows.
Officials said China’s total lending could be much higher when you factor in loans to state-owned companies and the central bank.
Sri Lanka borrowed heavily from China for its infrastructure, some of which ended up as white elephants.
Colombo was unable to repay a $ 1.4 billion loan for a port construction in southern Sri Lanka and was forced to lease the facility to a Chinese company for 99 years in 2017.
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The United States and India warned that the port of Hambantota, on major international east-west shipping routes, could give China a military base in the Indian Ocean.
Both Colombo and Beijing have denied that Sri Lankan ports are used for military purposes.
Wang arrived in Sri Lanka on Saturday evening after visiting the nearby Maldives, on the final leg of his first trip abroad in 2022, which also took him to Eritrea, Kenya and the Comoros.
China offered infrastructure maintenance, medical assistance and visa concessions to the Maldives as Beijing strengthened its links with the strategically located archipelago.