Sri Lanka’s creditors demand deal details, including with China

COLOMBO: Sri Lanka’s bilateral lenders who agreed to restructure close to $6 billion in loans have demanded “comparability of treatment” with other creditors, including China.

The Official Creditor Committee (OCC), led by Japan, France and India, have requested details of Colombo’s other debt deals, a statement seen by AFP on Thursday read.

The grouping agreed in Paris on Wednesday to restructure $5.8 billion in loans.

But on the same day, Colombo struck another deal with the Exim Bank of China to cover $4.2 billion.

The OCC, which also included the United States, Canada and several European nations, said it had asked Colombo to provide “all information necessary for the OCC to ensure comparability of treatment”.

It also expected Colombo to strike a deal with private creditors “on terms at least as favourable” as the OCC had offered.

Sri Lanka defaulted on its foreign debt in April 2022 after running out of foreign exchange, and the unprecedented economic crisis forced then-president Gotabaya Rajapaksa to step down.

Sri Lanka had expected to rapidly conclude debt restructuring in line with a $2.9 billion IMF bailout programme, but delays in securing an agreement with China had held up the process.

Beijing is by far the largest single creditor of Sri Lanka, but Chinese funding is split into concessionary bilateral loans and private commercial credit.

While $4.2 billion of Chinese bilateral credit had been treated under debt restructuring on Wednesday, there was no word on a $2.18 billion loan from the China Development Bank considered a private commercial loan.

Sources involved with the process said the CDB loan was likely to be treated on par with the $12.55 billion International Sovereign Bonds, on which negotiations continue.

Sri Lanka’s total foreign debt was estimated at $37 billion, according to treasury data from the end of March. China accounts for $4.66 billion of a total of $10.58 billion in bilateral debt, followed by Japan with $2.35 billion, and India with $1.36 billion.