Image:Sri Lanka Govt mobilizing military to face protests by workers against# IMF proposed tax hikes. ( Image from ViewsCutter)
Informal group lauds pledges from India, Hungary, Saudi Arabia
Sri Lanka’s $2.9 billion IMF stalled without China’s backing
Paris Club creditors as well as Hungary and Saudi Arabia called on the world’s second-biggest economy to give the financial assurances needed for the South Asian nation to secure a $2.9 billion bailout from the International Monetary Fund. The call comes amid growing fears that China’s unilateral positioning might delay and complicate the financial rescue of Sri Lanka just like it happened in the case of Zambia.
Paris Club members, at a meeting in late January, “expressed their full commitment to negotiate with Sri Lanka terms of a restructuring of their eligible claims,” the informal grouping of official creditors said in a statement Tuesday. “The Paris Club members as well as Hungary and Saudi Arabia urged other official bilateral creditors, including China, to do the same in line with IMF program parameters as soon as possible.”
Sri Lanka IMF Deal Stalls Amid China-World Bank Relief Split
The appeal comes days after China said it wanted multilateral lenders to provide debt relief to Sri Lanka, a demand at odds with other creditors and seen as a hurdle to unlocking the IMF aid. The growing rift between Beijing and the Paris Club as well as multilateral institutions has delayed efforts to ease debt burdens on developing economies struggling to recover from the pandemic and repay loans amid a stronger US dollar.
Chinese lending accounted for almost 20% of Sri Lanka’s public foreign debt in May 2022, according to research by the School of Advanced International Studies at Johns Hopkins University, while the World Bank and Asia Development Bank held 10% and 15% shares respectively.
While piling pressure on China, western lenders praised non-Paris-Club creditors who have joined the international process. Hungary has made a commitment to negotiate debt relief, Saudi Arabia acknowledged the need for offering financing assurances in the near future and India made a specific and credible pledge, the statement said.
The Paris Club has already given its official support to the debt restructuring process, it said.
By Srinivasan Sivabalan / Bloomberg