China says it will help Sri Lanka in its debt restrucuring process

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Prime Minister Dinesh Gunawardena, who is on an official tour of China, met Li in Beijing, a statement from the Sri Lankan prime minister's office said. The two premiers also witnessed the signing of nine new agreements between China and Sri Lanka

Sri Lanka's Prime Minister Dinesh Gunawardena (L) and China's Premier Li Qiang shake hands before their meeting in Beijing. AFP

China will help Sri Lanka in its debt restructuring process, Chinese Premier Li Qiang told Prime Minister Dinesh Gunawardena, as the South Asian nation resurrects from an economic crisis.

Gunawardena, who is on an official tour of China, met Li on Tuesday in Beijing, a statement from the Sri Lankan prime minister's office said. The two premiers also witnessed the signing of nine new agreements between China and Sri Lanka.

China is Sri Lanka's largest bilateral lender owning 52 per cent of the USD 40 billion external debt when Sri Lanka announced its sovereign default in 2022.

The Sri Lankan prime minister's China visit comes days after the International Monetary Fund (IMF) concluded its second review of the $2.9 billion bailout with Sri Lanka.

During the meeting between the two leaders, China also offered assistance to develop the Katunayake International Airport, Hambantota Port and Colombo Port City in the island nation while praising Sri Lanka for picking itself up after periods of economic downfall.

Beijing's position on debt restructuring has not been made public, but Sri Lankan officials have said China was reluctant to put a cap on its loans but could extend the tenure and adjust interest rates.

Sri Lanka in 2022 ran out of foreign exchange to finance essential imports and declared a sovereign default on its $46 billion foreign debt.

With inputs from agencies