By S. Sultan

The US, India, Japan, and Australia have all pushed for an IMF bailout for Sri Lanka around the amount of USD 3 billion. Moreover, the IMF has urged all creditors to rearrange their debt repayments to Sri Lanka. The most important aspect of this move is that, as the IMF has stated, China, one of the main Sri Lanka’s creditors, must also restructure its debt to Sri Lanka, but China is hesitant. Already, US Ambassador to Sri Lanka stated that all creditors of Sri Lanka must restructure their debts to the country on an equal playing field.

China’s reluctance has been based on an IMF bailout that came from the Quadrilateral Security Dialogue (Quad countries), which is pushing Sri Lanka strategically. China’s geopolitical rivalry with the Quad is hindering China’s investment projects under the Belt and Road Initiative (BRI). The Quad members have come under fire heavily from China for in the Asia-Pacific region for its “anti-china policy”.

Although, there is a criticism that Sri Lanka facing its debt increase due to large development programs mainly carried out by Chinese companies under former Sri Lankan President.  However, the incumbent president said that at the moment, his country's relationship with China "has not had many major glitches."

In April 2022, Chinese Ambassador to Sri Lanka, who met senior journalists in Colombo   expressed China’s concerns about the Sri Lankan Government’s approach to the International Monetary Fund (IMF). As the Sri Lanka’s Finance Minister, now Foreign Minister and his delegation are having negotiations with IMF officials at this moment. The bailout will always be based on terms. As china is closely watching the Sri Lanka developments to get an IMF bailout.

Chinese ambassador said that under the current economic difficulties Sri Lanka has the urgent need for assistance and China will continue its support including investments and get Sri Lanka out of the crisis and Sri Lanka at the same time should be “self-sustainable”. He further said that foreign debt, including domestic debt, must be sustainable. As the Sri Lanka will be unable to achieve long-term development goals. The current situation did not occur overnight. It has a long history of economic blunders from its previous governments.

In order to attract foreign investment and fulfil development goals, Sri Lanka infrastructure projects must be extensively funded. Chinese ambassador said that China would do everything possible to help Sri Lanka not only overcome the current crisis but also accomplish future development goals.

Sri Lankan government is stuck amidst the IMF bailout after the last discussions held in June 2022. The IMF said they had constructive and productive discussions with the authorities on economic policies and reform to be supported by an IMF Extended Fund Facility (EFF) arrangement and also, significant progress was made, and discussions will continue virtually to reach a staff-level agreement on the EFF arrangement in the near term.

The objectives of the new IMF-supported programme would be to restore macroeconomic stability and debt sustainability, while protecting the poor and vulnerable, safeguarding financial stability, and stepping up structural reforms to address corruption vulnerabilities and unlock Sri Lanka’s growth potential.

The final phase of the IMF agreement requires constructive discussions and creditors must comply with IMF demands. The geopolitical concerns of creditors have waned with the IMF, which is critical for the President. The recent geopolitical upheaval was the invitation of a Chinese surveillance ship, which is now docked at the Hambantota Port. The Government is attempting to ‘have the cake and eat it,’ and making it difficult for Sri Lanka to establish credibility in the first place. Sri Lankan President is also hoping to visit China in the near future to mend its ways with china.