A Chinese Ministerial visit to Sri Lanka will conclude today.
Arriving on January 14, the CCP’s delegation was led by the International Department Vice Minister Chen Zhou. With a visit to Colombo by Indian External Affairs Minister S. Jaishankar up next, it is evident that Sri Lanka is trying to restructure debt owed to its largest creditors to secure a $2.9 billion loan package from the IMF.
While the worst of Sri Lanka’s 2022 Debt Crisis has past, the nation is still hampered by high inflation. The IMF, however, will not release its loan until China and India both agree to lower Sri Lanka’s debt. While Sri Lanka hoped for a deal by the end of 2022, China is concerned that by reducing Sri Lanka’s debt, it sets a bad precedent for other Belt and Road Initiative investment recipients.
Nonetheless, the pressure mounting from economists, the US, and the IMF, and the CCP’s desire to keep its hard-fought influence in the Indian Ocean will likely be enough to force China’s hand in negotiations. It is likely that China, together with India, will agree to write down its loans to Sri Lanka within the next month, allowing for the IMF to release its loan package.
Scott is an Analyst at Foreign Brief and a Project Manager at Management Systems International (MSI) managing operations for overseas contracts in their Africa and Eastern Europe (EE) Division. Previously, he was a Program Associate at ABA ROLI supporting their East Africa program unit. His specific interests are geopolitics, regional conflict and governance, and political and economic developments in Sub-Saharan Africa.