As Sri Lanka pins hopes on IMF, China pledges more aid 

Development coincides with Sri Lanka’s talks with the IMF in DC

China has pledged “an urgent emergency humanitarian aid” of RMB 200 million [roughly $ 31 million] to Sri Lanka, even as Colombo pursues upto $4 billion support from the International Monetary Fund in Washington DC this week.

Sri Lanka’s Foreign Ministry said the Chinese assistance, being extended through the China International Development Cooperation Agency (CIDCA), includes 5,000 tonnes of rice, pharmaceuticals, production materials and other essentials. Further, China’s Yunnan Province has announced a donation of RMB 1.5 million worth of food packages to Sri Lanka, the Ministry said following a meeting between Foreign Minister G.L. Peiris and the Chinese Ambassador in Colombo on Thursday.

The development coincides with Colombo’s talks with the International Monetary Fund in Washington DC for a comprehensive package to help the island nation restructure its debt and revive its economy. The Sri Lankan government has pinned its hopes on IMF support, after announcing a default on its $51 billion foreign debt and raising interest rates in the lead up to negotiations with the Fund.

Sri Lankan Finance Minister Ali Sabry is currently in Washington DC and has met delegations of the IMF and the World Bank, US government officials, and Indian Finance Minister Nirmala Sitharaman, who is also in DC for the Spring meetings of the IMF and World Bank.

According to Indian government officials, Ms. Sitharaman has urged the IMF to provide Sri Lanka with assistance, as the country grapples with one of its worst economic downturns since its independence in 1948. India’s push comes in addition to its own support of $ 2.4 billion since the beginning of this year, by way of a currency swap, loan deferment, and credit lines for food, fuel, and medicines. Sri Lanka had also sought Indian assistance in securing “bridge financing”.

Scrambling for dollars to import essentials, Colombo appears to be tapping other sources as well. In March this year, the Chinese Ambassador in Colombo told a media conference that Sri Lanka had sought a new loan and buyer’s credit from China totalling $2.5 billion, apart from the $2.8 billion that Beijing extended to Colombo since the outbreak of the pandemic. Neither side has indicated if the latest $31 million emergency assistance from China is part of Colombo’s recent $ 2.5 billion request, that the Ambassador said was being “studied” by Beijing.

Meanwhile, Colombo awaits good news from the IMF as its economic crisis aggravates. The Rajapaksa government is under considerable pressure, amid persisting street protests by citizens asking President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa to resign immediately.