Sri Lanka has a debt of $7.4 billion, almost a fifth of its public external debt, which it owes to Chinese lenders, said a report published on Wednesday by the China Africa Research Initiative (CARI).
The study also pointed towards a figure which is more than the “often-quoted 10 to 15 percent figures”. The study added that a “significant portion” of the nation’s debt to China had been recorded under lending to state-owned enterprises rather than the central government.
The economic crisis has hit Sri Lanka hard which is at the center of a debt restructuring after long years of mishandling economic factors mixed with the COVID-19 pandemic. The nation sees itself diving deep into the worst economic crisis since its independence from Britain in 1948 and tipping into default.
Sri Lanka’s biggest Chinese lenders are Export-Import Bank of China (EximBank) and China Development Bank, totaling $4.3 billion and $3 billion respectively, according to the data collected by CARI at the Johns Hopkins University School of Advanced International Studies.
The largest bilateral creditor of Sri Lanka is China, which is also involved in official creditor negotiations to restructure the nation’s debt together with Japan and India.
“China will have to play a major role in Sri Lanka’s debt restructuring process,” CARI researchers Umesh Moramudali and Thilina Panduwawala wrote in the report.
The island nation initiated talks with bilateral creditors in September after securing a staff-level agreement of $2.9 billion with the International Monetary Fund. But the fund will not come in until the fund’s board approves the deal, a move that mandates financial assurances from bilateral lenders.
The fresh talks which were earlier expected to be held this month were postponed, posing uncertainty over how speedily the debt rework can progress.
The island nation owes $37.6 billion in total to foreign creditors. Public external debt increases to $40.6 billion when central bank debt in foreign currencies is added, of which 22% comes from Chinese creditors. This debt includes a $1.6 billion currency swap with China.
The $46.6 billion total debt figure released by the government in September differs from the figures provided by CARI because it leaves out loans to some state-owned businesses and local hard currency debt.
