Sri Lanka requests equity swap for some of its US$8b China debt
Prime minister says indebted country suffering because of global economic uncertainty
Sri Lanka has asked China to swap some of the US$8 billion it owes Beijing for equity in infrastructure projects and offered to sell stakes in its companies to Chinese ones, Colombo officials said on Saturday.
The ouster of president Mahinda Rajapaksa, who steered Sri Lanka toward China until his election defeat last year, was a setback for relations as his successor has reviewed projects to check if they were fair and legal.
But Sri Lankan President Maithripala Sirisena’s government, now faced with falling foreign reserves, a balance of payments crunch and few, if any, alternative investors, is heading back into China’s embrace, albeit asking for better terms.
Speaking to reporters in Beijing, Sri Lankan Prime Minister Ranil Wickremesinghe said his indebted country was suffering because of global economic uncertainty.
“We’ve been talking with some companies and also the government of China about the possibility of some infrastructure projects becoming public-private partnerships, in which part of the debt will become equity held by the Chinese companies,” he said.
Sri Lankan International Trade Minister Malik Samarawickrama said the country would also like additional funds from China, though it had not asked for a specific amount.
“We want to reduce the current debt by inviting Chinese companies, Chinese investors, to look at some of the enterprises in Sri Lanka, the state-owned enterprises, with a view to taking at least part of that equity over,” he said. “Then we can reduce the current debt that we have and open up the opportunity for us to take more funds from Chinese banks.”
Sri Lanka upset China when it ordered a review of the US$1.4 billion Colombo Port City project last year, citing irregularities in the awarding of the contract to state-owned China Communications Construction Company (CCCC) by the previous government.
Last month, the present government, grappling with a difficult economy, ordered the Chinese firm to resume work on the project, the country’s biggest foreign investment project, that includes apartments, shopping malls and marinas.
But CCCC, which had estimated that the shutdown would result in losses of more than US$380,000 a day, has sought compensation of US$125 million, according to Sri Lanka, which has said it cannot pay and wants to negotiate.
“The company has asked for additional compensation in view of the fact they say there has been a delay,” Wickremesinghe said. “But I think we can talk and settle it.”