China considering $2.5 billion loan, trade credits for Lanka: Chinese envoy

China is considering a $2.5 billion credit facility to Sri Lanka, Beijing’s top diplomat said in Colombo on Monday, as the island nation reels from an acute economic and energy crisis triggered in due to a shortage of foreign currency.

Chinese Ambassador Qi Zhenhong’s announcement follows India’s announcement last week to extend a $1 billion line of credit to Sri Lanka as part of its financial assistance to help the countries to cope with the economic crisis.

India extended a $500 million line of credit to Sri Lanka in February to help purchase petroleum products.

“Sri Lanka requested $2.5 billion, including a buyer’s credit of $1.5 billion. It (the request) is under consideration,” Qi told reporters here.

“The two countries must now discuss how the loan and buyer credit will be used,” he added.

Buyer’s credit is a short-term loan given to an importer by a foreign lender for the purchase of goods or services. An export finance agency guarantees the loan, thereby mitigating the risk for the exporter. Buyer’s credit allows the buyer, or importer, to borrow at lower rates than would be available on the domestic market.

Qi, however, gave no direct answers to questions about whether China would restructure the debt owed by Sri Lanka.

During Chinese Foreign Minister Wang Yi’s visit to Sri Lanka in January, President Gotabaya Rajapaksa asked Beijing for debt restructuring to help the country overcome the current economic difficulties.

Qi said China will not take advantage of Sri Lanka’s current situation and is always ready to help.

China has provided $2.8 billion in financial aid, including a $1.5 billion currency swap, to Sri Lanka since the COVID-19 pandemic broke out in the country in 2020.

Chinese loans account for about 10% of Sri Lanka’s external debt.

In addition to applying for India’s economic relief package, Sri Lanka is considering a facility from the International Monetary Fund (IMF).

The unprecedented currency crisis triggered a fuel crisis, power cuts and cooking gas shortages. Import restrictions aimed at saving foreign currency have caused a shortage of basic necessities.

Police say a 29-year-old man was stabbed to death on Sunday following an argument for jumping the queue outside a petrol pump.

On Saturday, two 70-year-old men died of exhaustion as they waited in winding queues outside petrol stations for more than six hours in scorching heat.

Meanwhile, state-owned Ceylon Petroleum Corporation (CPC) said the first batch of fuel under India’s line of credit was unloaded on Monday. The 35,000 metric tonnes of diesel would ease queues, Energy Minister Gamini Lokuge said.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

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