Indian Finance Minister Nirmala Sitharaman has told the International Monetary Fund (IMF) and the World Bank that China must be treated just like any other creditor once talks begin to restructure Sri Lanka’s debt. Crisis-hit island country announced defaulting on its external loan repayment obligations earlier this month. 

“All creditors must be treated equally and with transparency,” Sitharaman, who is currently in Washington to meet IMF and World Bank officials, was quoted as saying by Bloomberg. “I’ve emphasized that point in general and in the context of Sri Lanka,” she added.

Gripped in a severe foreign exchange crisis, the country of 22 million has been struggling to pay for the imports of essential goods, forcing the government to announce its plan to default on its $51 billion of debts; Of which Chinese loans account for around $5 billion.

Besides Sitharaman, Indonesian Finance Minister Mulyani Indrawati has also said that China should demonstrate leadership in tackling the growing debt problem among developing countries. She said more nations will face a similar situation.

“There will be more cases coming… At some point China has to recognize that they need to step up to actually take that kind of leap, and provide the platform for all creditors to be able to discuss ... how this restructuring is going to be real,” Indrawati was quoted as saying by Reuters.

Sitharaman said she has also requested the IMF to consider rapid aid for middle-income-classified Sri Lanka — typically given only to low-income countries — as the pandemic has destroyed the island’s tourism revenue.

The country will need bridge financing of around $3 billion till the IMF finalizes its aid package. Talks are already underway with India and China for raising the money. Significantly, Bangladesh is expected to postpone the repayment of around the $450 million currency swap facility that it had extended to Sri Lanka.

New Delhi has so far extended the assistance worth $2.4 billion, including a $1 billion line of credit for the imports of food, medicine, and other essentials.

Meanwhile, China has announced that it will soon send humanitarian assistance to Sri Lanka. The Chinese Embassy in Colombo confirmed that details of the assistance will be announced soon.

On Friday, Sri Lankan Prime Minister held a phone call with China’s Premier Li Keqiang who promised that Beijing will support the country to facilitate greater stability in economic and social development.

Earlier, Sri Lankan Finance Minister Ali Sabry had confirmed that they were seeking around $2.5 billion in assistance from China.

(SAM)