China-based Asian Infrastructure Investment Bank may give Sri Lanka the necessary relief that Sri Lanka was looking for. The country’s economy has been hit hard by the pandemic and rising oil prices. The Chinese bank is considering providing $100 million in emergency aid to the South Asian country.
According to a Reuters report, Sri Lanka has requested the lender for foreign currency liquidity support for state banks.
Last week, Finance Minister Ali Sabri said hard hit by the pandemic, rising oil prices and populist tax cuts by President Gotabaya Rajapaksa’s government, the South Asian island’s economy is in crisis, with usable foreign reserves down to $50 million. , the report said.
Sri Lanka’s president on Friday declared a second state of emergency in five weeks.
According to the report, China is Sri Lanka’s largest bilateral lender, with an outstanding $6.5 billion that has been lent over the past decade for major infrastructure projects including highways, a port, an airport and a coal power plant.
Notably, Beijing had extended its support to Sri Lanka with a $1.3 billion syndicated loan and a $1.5 billion yuan-denominated swap to run up the country’s reserves.
Sri Lanka and Beijing are said to be in talks for a $1.5 billion line of credit and a new syndicated loan of up to $1 billion.
Earlier this month, Colombo said talks on refinancing Chinese debt have begun after Sri Lanka suspended some foreign loan repayments in April.