Editor's note: On June 27, Zhou Rong, a senior researcher at the Chongyang Institute for Financial Studies at the Chinese People's University, was interviewed by the Russian Sputnik news agency about Sri Lanka's signing of a debt restructuring agreement with the Export-Import Bank of China in Beijing. The content of the article is forwarded as follows:
Supporters of Sri Lankan President Ranil Ranil Wickremesinghe set off firecrackers and distributed rice to the crowd, a traditional dish made from rice and coconut milk, to celebrate the signing of a debt restructuring agreement with China and other creditors. The announcement was made by the head of state during a televised address to the nation in Sinhala.
On June 26, Sri Lanka signed an agreement with the Export-Import Bank of China in Beijing. On the same day, Sri Lanka signed debt relief agreements in Paris with Japan, India and a number of other countries in the Paris creditors' club. All of this has allowed Sri Lanka to restructure its bilateral debt, which amounts to about $10 billion. The agreement allows for a postponement of the repayment deadline for all bilateral loans in Sri Lanka until 2028. In addition, Sri Lanka is allowed to repay bilateral loans in phases on preferential terms until 2043. Speaking to the nation, President Wickremesinghe said he would seek parliamentary approval of the agreements on 2 July.
Sri Lanka's bilateral debt restructuring agreement with China and other creditors has taken another step forward in restoring debt sustainability, the International Monetary Fund said on June 27. The head of the IMF's high-level delegation to Sri Lanka, Mr. Breuer, expressed hope that progress would also be made soon on reaching an agreement with external private creditors.
China's Ministry of Foreign Affairs on June 26 highlighted China's contribution to Sri Lanka's debt sustainability. Chinese Foreign Ministry spokesperson Mao Ning said that the Export-Import Bank of China took the lead in reaching a preliminary agreement with Sri Lanka on the disposal of China-related debts, which is crucial for Sri Lanka to continue to promote fiscal reform and win further support from international creditors. China is ready to continue to work with relevant countries and international financial institutions to support Sri Lanka in achieving debt sustainability.
In an interview with the Russian news agency Sputnik, Nikita Maslennikov, an expert at the Center for Political Technologies, noted that China's constructive attitude on this issue will bring it commercial and political dividends.
"In this way, China refutes various criticisms from the IMF and the World Bank, and at the same time shows that China is cooperating with other creditors to solve the debt problems of individual countries," said expert Nikita Maslennikov. This joint solution to the problems of individual countries shows that cooperation can eliminate or mitigate the high risk of geoeconomic fragmentation. Importantly, Sri Lanka's debt restructuring plan can be replicated in the future. In the long run, this will enhance China's prestige and influence in the international financial community as a full-fledged player in the multinational debt problem resolution mechanism. This is an important step in the internationalization of the renminbi and strengthens its position as an international means of payment and settlement, although it will not be immediately effective. ”
Sri Lanka owes $4.66 billion to China. $2.35 billion for Japan and $1.36 billion for India. Zhou Rong, a senior researcher at the Chongyang Institute for Financial Studies at Renmin University of Chinese, believes that a reasonable arrangement for Sri Lanka to delay debt repayment is a win-win situation for both borrowers and borrowers.
"The significance of reaching an agreement is to support Sri Lanka to achieve debt sustainability and achieve a win-win situation for both borrowers and borrowers," said expert Zhou Rong. As we all know, the Sri Lankan government has accumulated a huge debt of more than $50 billion, which can be said to have caused a significant negative economic impact. In this case, Sri Lanka needs creditors to be able to defer the repayment deadline. As far as China's attitude is concerned, it should be emphasized that many of the views that 'Sri Lanka will not pay its debts' or 'the Chinese government will forgive Sri Lanka's debts are wrong. Under the current circumstances, China will make reasonable arrangements for the postponement of debt repayment in light of Sri Lanka's actual national conditions, with the aim of enabling Sri Lanka to repay its debts in an orderly and gradual manner within its tolerance and without increasing the burden. For example, if the Sri Lankan economy is experiencing new difficulties for a period of time, the debt service arrangement may be adjusted randomly. In other words, Sri Lanka's debt will continue, but it will adopt a more reasonable and practical way in arranging debt repayment, taking into account the common interests of both sides, and ultimately enabling Sri Lanka to gradually repay its debts without destroying its economy, maintain its international credibility, and at the same time get a certain return on China's debt. This win-win situation will also give foreign investment the interest to enter the Sri Lankan market in the future. In addition, the significance of the agreement lies in the fact that we are looking for ways not to increase the economic burden of developing countries due to debt repayment, which is also one of the original intentions of China to take the lead in reaching a preliminary agreement with Sri Lanka on the settlement of China-related debts. ”
With China's support, Sri Lanka has faced a difficult fiscal situation and high external debt, but its policies have become more predictable and its investment platform has become clearer during the debt relief period. It is already clear to investors how the debt problem will be resolved, and debt is no longer putting as much pressure on the domestic economy as it was before the restructuring. It can be seen that the Sri Lankan economy has not lost its attractiveness to international partners, including Chinese investors.
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Established on January 19, 2013, Chongyang Institute for Financial Studies of Chinese University of China (Renmin University Chongyang) is the main funding project donated by Chongyang Investment to Chinese University and set up an education fund for operation.
As a new type of think tank with Chinese characteristics, Chongyang has hired dozens of former politicians, bankers, and well-known scholars from around the world as senior researchers, aiming to pay attention to reality, advise the country, and serve the people. At present, the Chongyang National People's Congress has 7 departments and 4 operation and management centers (the Center for Ecological Finance, the Center for Global Governance, the Center for China-US People-to-People Exchange, and the China-Russia Center for People-to-People Exchange). In recent years, the Chongyang National People's Congress has been highly recognized at home and abroad in the fields of financial development, global governance, major-country relations, and macroeconomic policy.