The Paris Club, an informal group comprising officials from 23 advanced economies or creditor nations, has formally approached India and China to seek the cooperation of the two governments in restructuring Sri Lanka’s foreign debt, Bloomberg reported on Monday.
The Paris Club's formal request to New Delhi and Beijing was made in August, with a response still awaited, according to the report.
In an official statement in the first week of September, the Paris Club said that it was willing to coordinate with Sri Lanka’s official creditors in a bid to restructure Colombo’s overall debt.
The International Monetary Fund (IMF) announced a staff-level agreement (SLA) for $2.9 billion with Colombo on September 1. However, the IMF will start disbursing the funds under the bailout pact only if Colombo manages to get assurances that its foreign creditors would restructure their respective debt.
Japan, China and India are Sri Lanka's biggest creditors, accounting for around $10 billion of Colombo’s nearly $51 billion in foreign borrowings. So far, none of the governments has agreed to restructure their debt to help Colombo meet the terms of the IMF deal.
Unlike China and India, Japan is a member of the Paris Club.
30 September 2022, 15:34 GMT
Sri Lankan authorities have said that the debt-restructuring talks could go on till 2023, which would prolong the economic crisis.
As a middle-income country, Sri Lanka wasn’t included in the G-20 ‘Common Framework’ adopted in 2020. The framework allows low-income countries to restructure the loans owed to the G-20 governments, which include the Paris Club economies as well as India and China.
So far, Zambia, Chad and Ethiopia have availed themselves to the facility, and had their foreign debt reorganized under the ‘Common Framework’.
Meanwhile, consumer inflation in Sri Lanka topped 70 percent in August, mostly driven by high food and fuel prices.
The nation of about 22 million is facing its worst economic crisis in over seven decades, with depleting forex reserves leading to the government being unable to pay for food and fuel imports, amid escalating commodity prices in the wake of the Ukraine crisis.
In April, Sri Lanka announced that it would be defaulting on its foreign debt repayments.
As a middle-income country, Sri Lanka wasn’t included in the G-20 ‘Common Framework’ adopted in 2020. The framework allows low-income countries to restructure the loans owed to the G-20 governments, which include the Paris Club economies as well as India and China.
So far, Zambia, Chad and Ethiopia have availed themselves to the facility, and had their foreign debt reorganized under the ‘Common Framework’.
Meanwhile, consumer inflation in Sri Lanka topped 70 percent in August, mostly driven by high food and fuel prices.
The nation of about 22 million is facing its worst economic crisis in over seven decades, with depleting forex reserves leading to the government being unable to pay for food and fuel imports, amid escalating commodity prices in the wake of the Ukraine crisis.
In April, Sri Lanka announced that it would be defaulting on its foreign debt repayments.