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Sri Lanka kicks off crucial debt restructuring talks with China

By KRISHAN FRANCIS Associated Press

COLOMBO, Sri Lanka (AP) — Sri Lanka’s president said Thursday his government has begun debt restructuring talks with China, an important step toward finalizing the International Monetary Fund’s rescue of the island nation from its worst economic crisis.

President Ranil Wickremesinghe told parliament Thursday that initial talks will continue after the Communist Party of China congress meeting that begins on Oct. 16.

Wickremesinghe, who recently returned from a trip to Japan, also said that Japanese authorities have agreed to mediate talks with China.

“China has been supporting us since ancient times and we believe that it will do the same in these difficult times,” Wickremesinghe said.

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Sri Lanka is on the brink of bankruptcy and has defaulted on its $51 billion foreign debt, of which $28 billion is due by 2027.

Sri Lanka has reached a preliminary agreement with the IMF for a rescue package of 2.9 billion dollars over four years. The completion of the bailout depends on guarantees from Sri Lanka’s creditors on the debt restructuring.

Sri Lanka has borrowed heavily from China over the past decade for infrastructure projects including a seaport, an airport and a city being built on reclaimed land. The projects did not earn enough income to repay the loans, a factor in Sri Lanka’s economic problems.

China is not Sri Lanka’s biggest creditor. It has a share of around 10% of Sri Lankan loans after Japan and the Asian Development Bank. However, China’s assent to restructuring its loans is crucial because the United States has insisted that China cooperate in the restructuring “openly and on comparable terms with each other.”

China has not committed to any restructuring, although it has offered an additional loan.

See more AP Asia-Pacific coverage at https://apnews.com/hub/asia-pacific

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