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Translated by:  MOS Translation Team – NaN

A few days ago, Sri Lanka announced that it would suspend the repayment of foreign debts and warned that it might default on its balances.  On April 16th, it ordered to halt the Colombo Stock Exchange (CSE) for five days starting from April 18th.  In response to the crisis, Sri Lanka requested to borrow US$2.5 billion from Communist China but received no response.  However, the Chinese Communist Party (CCP) regards Sri Lanka as a critical country for the Belt and Road Initiative (BRI).

Image Source: Orientaldaily

The Russia-Ukraine war is increasing the burden on economically struggling countries.  Sri Lanka has a turbulent political situation and a collapsing economy.  The government unilaterally announced a few days ago that it would suspend the repayment of foreign debts and use its remaining foreign exchange reserves to import necessities for its people, including food and fuel.  The move led to Fitch and S&P (Standard and Poor) downgrading Sri Lanka’s credit rating to C and CC, respectively.

Sri Lanka ordered the CSE to stop trading for five days from April 18th to avoid an overreaction in the stock market.  The CSE’s All Share Index has fallen more than 38% in the past three months, and the rupee in Sri Lanka has lost more than 35% against the US dollar in the past month.

Palitha Kohona, Sri Lanka’s Ambassador to China, said on April 13th, that he hoped Communist China would provide US$2.5 billion in financial support.  Sri Lanka planned to use US$1 billion of borrowing to repay existing Chinese loans due in July and use the remaining US$1.5 billion to buy goods from Communist China, such as textiles.  However, the CCP has not responded to Sri Lanka’s request.

On April 18th, Ali Sabry, Sri Lanka’s Finance Minister, led a delegation to have formal talks with the International Monetary Fund (IMF) in Washington.  Initially, IMF thought Sri Lanka did not meet their criteria but later decided to reconsider Sri Lanka’s request after India made representations on a Rapid Financing Instrument (RFI).  Sri Lanka is seeking US$3 billion from multiple sources to ease its debt default crisis.


Edited and Proofread by:  Linda Progress
Posted by: Peter Chen

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