China announces it will provide humanitarian aid to crisis-ridden Sri Lanka, but remains silent on debt rescheduling

BEJING: After weeks of hesitation to respond to cries for help from crisis-ridden Sri Lanka, China, whose large loans and investments in the island nation have led to allegations of debt diplomacy, says that it would provide “emergency humanitarian aid” to Colombo, but remained silent on its plea for debt rescheduling.
The Chinese government has decided to provide emergency humanitarian aid to Sri Lanka to help the country cope with the current difficulties, said Xu Wei, spokesperson for the China International Development Cooperation Agency.
China has noticed Sri Lanka’s economic difficulties, Xu said, adding that as Sri Lanka’s traditional friendly neighbor, the Chinese government has decided to provide emergency humanitarian aid to the country to help it cope. current difficulties, the official Xinhua news agency said. Xu quoted on Tuesday.
Chinese Foreign Ministry spokesman Wang Wenbin reiterated the same at a press briefing here on Wednesday, adding that “the Chinese side has announced that it will provide emergency humanitarian aid to Sri Lanka”.
“We will continue to offer support and assistance to the best of our abilities to help Sri Lanka reinvigorate its economy and improve the livelihoods of its people,” he said.
Sri Lanka has been grappling with economic turmoil not seen since gaining independence from Britain in 1948. The crisis is caused in part by a lack of foreign currency, which means the country cannot afford to pay the imports of staple foods and fuel, resulting in an acute crisis. shortages and very high prices.
The island nation is witnessing large-scale protests against the government’s handling of the debt-ridden economy – the worst economic crisis in the country’s history.
On Monday, Sri Lanka applied to the IMF for a Rapid Financing Instrument (RFI) to immediately pull the country out of the quagmire of the economic crisis.
In the grip of a huge forex crisis, Sri Lanka announced on April 12 a precautionary default on all its external debt totaling $51 billion as a “last resort” and emergency measure.
While China dithered, India has given around $2.5 billion in aid over the past three months to Sri Lanka, including credit facilities for fuel and food and is reportedly considering further aid of two billion dollars to help the island nation in crisis.
Xu and Wang, however, did not provide any details on China’s humanitarian assistance.
Earlier reports said China had offered shipments of rice to Sri Lanka, citing the Rubber-Rice Pact signed in 1952 under which China supplied rice and imported rubber from Colombo.
Beijing has so far remained silent on Chinese Ambassador to Colombo Qi Zhenhong’s announcement last month that China was considering a $2.5 billion credit facility to Sri Lanka.
Moreover, China has so far evaded questions about Sri Lankan President Gotabaya Rajapaksa’s request to Chinese Foreign Minister Wang Yi during his visit last December to restructure Colombo’s debt repayments in order to bail out his government.
Sri Lanka is estimated to owe China debt payments of around $1.5 billion to $2 billion this year. Overall, China’s loans and investments in Sri Lanka have been estimated at more than $8 billion over the past few years.
While keeping quiet about Sri Lanka’s debt deferral, China quietly agreed to Pakistan’s request for a $4.5 billion loan deferral last month. The adjournment was announced by former Pakistani Foreign Minister Shah Mehmood Qureshi during his visit to China on March 30. instead, may consider providing loans to repay debt owed to it, perhaps with stricter conditionality.
Chinese loans to Sri Lanka are said to be around 10% of its external debt covering huge infrastructure projects such as the Port of Hambantota, which China secured on a 99-year lease in the form of a debt swap, attracting international critics with allegations of debt diplomacy, trapping small countries with huge loans and projects under its Belt and Road Initiative (BRI).
China is said to be concerned as besides Sri Lanka, other BRI signatories, Pakistan and Nepal in South Asia, have also faced a financial crisis with a massive forex crisis in search of international bailouts.
According to a study by AidData, an American data research laboratory, Chinese loans account for 65% of bilateral debt, worth hundreds of billions of dollars in Africa, Eastern Europe, Latin America and in Asia.
Commenting on China’s dilemma over bailouts, Ganeshan Wignaraja, senior research fellow at the National University of Singapore, said Beijing would likely be reluctant to intervene.
“China doesn’t want to lose money,” he said. “If China grants Sri Lanka a special bailout, other Belt and Road countries facing similar difficulties will ask for the same kind of assistance,” he said recently. at the South China Morning Post, based in Hong Kong.
But Colombo’s decision to suspend payments on its foreign debts will put pressure on Beijing to be part of international aid to Sri Lanka, Wignaraja said. Wignaraja said helping Sri Lanka would be a way to address accusations of debt entrapment. “Otherwise the label will stick,” he said.
“If China behaves like a bank, it will make this debt problem much worse than the debt trap and it will actually become a Chinese problem,” Wignaraja said. He also said China should look at a country’s “debt situation” when providing loans. “He must not give too much money on commercial interest rates so that countries run the risk of a debt trap like Sri Lanka has now fallen. China therefore has a moral, legal and developmental obligation,” he said.

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