Foreign Ministers of China and Sri Lanka Discuss the Economic Crisis

On Sunday, Sri Lanka’s Foreign Minister Ali Sabry met with his Chinese counterpart Qin Gang in this city to discuss the bilateral relationship’s future course as well as the severe economic crisis that has caused his nation to default on its foreign debt. After Sri Lanka’s debt issue caused severe political and economic unrest on the island country last year, Sabry is making his first trip to China. Qin was mentioned in an official account of the two leaders’ meeting as advocating for the cooperative development of excellent Belt and Road projects.

According to the readout, Qin said that China will continue to do all it could to support Sri Lanka’s economic and social growth as well as the enhancement of the standard of living for its people. The majority of loans to Sri Lanka come from China, whose loans make up 10% of Colombo’s total foreign debt, which surpasses USD 51 billion. The International Monetary Fund (IMF) offered a roughly USD 3 billion bailout facility to indebted Sri Lanka in March of this year to assist in stabilizing the nation’s economy after it was shaken by a terrible economic crisis the previous year.

Debt-ridden After declaring its first-ever financial default in April of last year, Sri Lanka is still battling to return its economy to normalcy. India has hurriedly provided Sri Lanka, which has almost declared bankruptcy and defaulted on all foreign debts, with roughly USD four billion in assistance in the shape of line credit and other forms. China reportedly refused to support the international lender’s debt reduction objectives in order for it to clear the loan and gave a two-year suspension on loan repayment by Colombo, although supporting the IMF loans for Sri Lanka.

There was no mention of any loan-related conversations in the official readout of the Qin-Sabry negotiations. Official data indicates that Sri Lanka has a total debt of USD 83.6 billion, of which USD 42.6 billion is domestic debt and USD 42 billion is foreign debt. Sri Lanka had its biggest economic crisis since gaining independence from Britain in 1948 in April 2022. This crisis was brought on by currency shortages that led to widespread public outcry. Mid-July saw the overthrow of the previous president, Gotabaya Rajapaksa, after months of mass demonstrations. Rajapaksa began IMF talks after declining to ask the international lender for assistance.