Sri Lanka in talks for $100 million emergency funding from Beijing-backed bank

By Uditha Jayasinghe

COLOMBO -The China-backed Asian Infrastructure Investment Bank is considering granting $100 million in emergency support to Sri Lanka, the country’s finance ministry said on Sunday.

Sri Lanka has requested foreign-exchange liquidity support for state banks from the lender, it said in a statement.

Hit hard by the pandemic, rising oil prices and populist tax cuts by the government of President Gotabaya Rajapaksa, the South Asian island’s economy is in crisis, with usable foreign reserves down to $50 million, Finance Minister Ali Sabry said last week.

Shortages of imported food, fuel and medicines have brought thousands onto the streets in over a month of mostly peaceful protests. Rajapaksa declared a second state emergency in five weeks on Friday.

The multilateral AIIB, founded in 2014 to promote infrastructure investing throughout Asia, draws most of its funding from China.

China is Sri Lanka’s largest bilateral lender, with an outstanding balance of $6.5 billion mostly lent over the past decade for large infrastructure projects, including highways, a port, an airport and a coal power plant.

Beijing has extended Sri Lanka a $1.3 billion syndicated loan and a $1.5 billion yuan-denominated swap to boost its reserves. The two countries are in talks for a $1.5 billion credit line and a fresh syndicated loan of up to $1 billion.

Colombo said this month that talks had started on refinancing Chinese debt after Sri Lanka suspended some of external debt repayments in April.