China envoy warns Sri Lanka/IMF talks could impact bilateral negotiations

China’s Ambassador Qi Zhenhong was quoted as saying that Sri Lanka’s talks with the IMF will have an impact on Sri Lanka’s attempt to secure a US $ 2.5 billion loan from China.

China is “sad” that Sri Lanka went to the International Monetary Fund (IMF) and defaulted on its debt, Ambassador Qi Zhenhong said, adding that China is watching the island nation’s negotiations with the Washington-based lender.

“China has done its best to help Sri Lanka not to default but sadly they went to the IMF and decided to default,” Ambassador Qi told reporters at a media briefing in Colombo.

“The debt restructuring definitely will have an impact on future bilateral loans,” he said.

Ambassador Qi said in March that China was considering a request for 1.5 billion US dollars in buyer’s credit and another billion-dollar loan.

The IMF determined that Sri Lanka’s debt was not sustainable or could not be repaid with macro-economic adjustments involving rate and tax hikes alone and had to restructure debt to reduce the gross finance need to a manageable level.

On April 12, Sri Lanka said it was suspending payment on foreign debt and will negotiate with creditors.

Ambassador Qi Zhenhong was quoted as telling a group of journalists today that China was closely monitoring the negotiations to understand the terms and conditions of the deal with the IMF.

Qi Zhenhong has also said that China’s support to Sri Lanka will not be based on a particular party or Government but the people of Sri Lanka.

The IMF has decided to support Sri Lanka’s efforts to overcome the current economic crisis by working closely with the authorities on their economic program.

Issuing a statement this week the IMF said that it will engage with all stakeholders in support of a timely resolution of the crisis.

The IMF team for Sri Lanka held initial technical discussions on an IMF-supported program with the delegation.

Going forward, Masahiro Nozaki said the IMF team will support Sri Lanka’s efforts to overcome the current economic crisis by working closely with the authorities on their economic program, and by engaging with all other stakeholders in support of a timely resolution of the crisis.