Sri Lanka turns to China rather than IMF to avoid default

Sri Lanka turns to China rather than IMF to avoid default

Sri Lanka’s ultranationalist government looks set to receive a financial lifeline from China rather than an International Monetary Fund bailout to avoid defaulting on foreign debts, affirming the Asian giant as lender of the last resort to the strategically located South Asian island nation.

President Gotabaya Rajapaksa’s government desperately needs cash to service over $15 billion dollars owed to foreign creditors. China eased some of the tension earlier this year by injecting $500 million as part of a $1.2 billion syndicated loan from the China Development Bank.

“We have been in touch with the China Development Bank,” Nivard Cabraal, minister of money and capital market and state enterprise reforms, told Nikkei Asia. “We are now negotiating the additional $700 million.”

The second tranche is wanted for the end of the year. “There are options available for Sri Lanka to have inflows coming in from our bilateral partners, and we are confident that they will materialize,” said Cabraal, who was governor of the Central Bank of Sri Lanka for nearly nine years until 2015.