Sri Lanka’s president said Thursday that he would ask Japan to initiate debt restructuring talks with Sri Lanka’s main creditors, including China and India, as the crisis-hit nation strives to revive its collapsed economy.
President Ranil Wickremesinghe said that he would travel to Japan in September to discuss the matter with Japanese Prime Minister Fumio Kishida.
India, on the other hand, has emerged as Sri Lanka’s lifeline, providing about $4 billion in credit lines and swaps to keep the country’s economy afloat this year.
The rivalry between China and India appears to be complicating matters for Sri Lanka, which leased its Hambantota port to China for 99 years in 2017 to convert its Chinese loan into equity. India has been concerned that the port will be used as a military base.
IMF TalksThe cash-strapped nation is also in talks with the International Monetary Fund (IMF) for a $3 billion loan package. The IMF representatives are expected to visit Sri Lanka by the end of August for talks on a staff-level agreement.
Wickremesinghe said that expenditures will be slashed by a “few hundred billions” of rupees to channel funds for welfare and to repay high interest rates. Sri Lanka aimed for 3.9 trillion rupees ($11 billion) in expenditures in its last budget.
Budget cuts will include the defense department, which has retained the highest budgetary allocation despite Singhalese-majority Sri Lanka ending a bloody civil war with Tamil rebels more than a decade ago.Wickremesinghe was sworn in as president on July 21 to replace former President Gotabaya Rajapaksa, who fled the country in July after protesters stormed his official residence to call for his resignation.
The country defaulted on its debt in May and declared bankruptcy on July 5.