Sri Lanka secures $1 billion loan from China

COLOMBO (News 1st) -  The Governor of Central Bank addressing the press yesterday (August 03), stated that the Sri Lankan Government had secured a US $1 billion Chinese loan. The syndicated loan of $1 billion, is expected in two tranches of $500 million, one in August and the other in October. According to Dr. Indrajit Coomaraswamy,  Sri Lanka's foreign reserves currently stands at $8.4 billion and the Governor expsect the reserves to rise to around $9 billion by the end of the year. Dr. Coomaraswamy states that if everything goes well another IMF loan of US $250 million is expected. Further, he stated that the Government is working towards a panda bond issuance before the end of the year. According to the Governor, Sri Lanka had gone 'on a non-deal roadshow' to show China that our country is worth investing in. The meeting with the Peoples Bank of China which is their Central Bank was evidently encouraging. The Deputy Governor of the People's Bank of China had unsolicitedly suggested that a joint task force should be set up to examine how Sri Lanka could explore on the panda bond market. Dr. Coomarasway stated that the Government hopes to invest in Panda Bonds worth about $ 250 million, and service about $1.5 billion out of them. By the end of the year after the balance of payment, the country's entire reserve is expected to be about $ 9 billion and the Governor reasons that it is a reasonable amount in terms of price stability and external viability.

Debt Issues

The IMF which bailed out Sri Lanka in June 2016 with a $ 1.5 billion staggering loan, has warned Sri Lanka of its heavy debt. "China will continue to provide support, including much-needed funds for the development of Sri Lanka,” the Chinese Embassy in Colombo announced in July. China had stated its loan portfolio in Sri Lanka was $ 5.5 billion as of last month, just over a tenth of Sri Lanka's total $ 51.82 billion external debt. Last year renegotiating loan repayment plans, Sri Lanka granted a 99-year lease on the Hambanthota port to Beijing over its inability to repay Chinese loans for the $ 1.4 billion project. Sri Lanka’s economy has been on the mend since the IMF bailout, but growth in 2017 at 3.1% was the slowest in 16 years. The Central Bank had forecast 2018 growth at between 4.0 to 4.5%, but Dr. Coomaraswamy yesterday revised his estimate for the calendar year to below 4.0%. However, the Governor states that Sri Lanka is in a reasonably comfortable place.