France, India and Japan have teamed up and invited others to join in the rescue of Sri Lanka’s crippled economy, a crisis blamed on mindless spending by the island’s rulers of money borrowed from China.
At the launch of the rescue scheme last week, France urged creditors to ensure “transparency” while negotiating the restructuring of Sri Lanka’s suffocating debt, which disrupted imports of lifeline supplies of fuel, food and medicines and sparked political chaos.
“This creditor committee is open to other creditors who are invited to join. In any case we will maintain coordination with them in order to make sure that we have comparable treatment,” said Emmanuel Moulin, Director-General Treasury France.
“Now the creditors should keep the momentum and start the restructuring process in a coordinated manner to ensure transperency and comparability of treatment based on their financial assurances and IMF parameters,” he added.
Last month, the International Monetary Fund authorised a 2.6 billion euro programme to help Sri Lanka confront its worst economic crisis in over seven decades. The debt-stricken island nation has other creditors also knocking on its doors.
Crushing debt
The three-nation committee will start the negotiations without delay.
The authorities in Colombo initiated talks this year in an effort to ease Sri Lanka’s debt situation. The government hopes to clinch a deal by May.
Sri Lanka owes 6.4 billion euros to bilateral creditors. China is its largest single lender, accounting for 10 percent of the island’s total foreign debt.
Colombo also owes 1.8 billion euros to the 22-nation Paris Club and almost one billion euros to India, according to official data.
It also must renegotiate over 10.9 billion euros of debt in Eurobonds with foreign private creditors and 1.8 billion euros on other commercial loans, according to Reuters news agency.
Japan Finance Minister Shunichi Suzuki said the initiative put in place by France and the two Asian nations will encourage other creditors to discuss Sri Lanka’s crippling debt.
“It will be very nice if China will join,” Suzuki told reporters on the sidelines of a finance ministers’ meeting of G20 members as Beijing promised to work out a medium- and long-term rescue plan to help the island nation of 22 million people recover economic equilibrium.
Slumbering dragon
“China has clearly stated that it will extend the maturity of Sri Lanka’s debts due in 2022 and 2023,” media quoted Chinese Foreign Ministry spokesman Wang Wenbin as promising.
Some experts regard the Chinese pledge with deep suspicion saying Beijing should have been the first to extend help instead of France, Japan or India.
“Chinese initiatives and moves in the past have been with a vested interest. It is not helping Sri Lanka for the sake of helping,” alleged Sharad Kohli, an Indian economist, as media accused China of dithering.
“Sri Lanka will now know who its real friends are,” Harvard-educated Kohli said, warning that France, Japan and India could walk into a minefield of challenges while negotiating with Sri Lanka’s bilateral creditors such as China.
Suspicious Delhi
Delhi also eyes with suspicion Chinese-funded projects in southeast Asia, labelling them a “string of pearls,” designed to encircle and strangle India’s strategic interests in the region.
Delhi believes Colombo’s debt burden is yet another tactical headache for India, which in 1962 fought a brief but bloody border war with China in a territorial dispute which remains unresolved.