High-level Chinese delegation to visit Colombo as Lanka struggles to boost foreign reserves

Colombo:A high-powered Chinese delegation led by ruling Communist Party Politburo member Yang Jiechi is expected to arrive here on Thursday, amid Sri Lanka struggling to boost its foreign reserves after its economy was hit hard by the coronavirus pandemic.

Yang, former China’s foreign minister, will become the first top ranking Chinese official to travel to the South Asian region since the global outbreak of the coronavirus pandemic, officials here said.

The Chinese delegation led by Yang is also expected to meet President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa on Friday.

The visit assumes significance as Sri Lanka is expecting to receive the second tranche of a USD 1.2 billion syndicated Chinese loan. The island nation received the first trance of USD 500 million in March.

The Sri Lankan government had said that the anticipated Panda (Chinese) bonds and the syndicated Chinese loan will strengthen the country’s balance of payments in the backdrop of the country’s credit rating downgrade by Moody’s last week.

Credit ratings agency Moody’s downgraded Lanka’s sovereign credit rating by two notches, saying the South Asian nation would be hard-pressed to secure funding to service its huge foreign debt.

Sri Lanka was pushed down from “B2” (high credit risk) to “Caa1” (very high credit risk), as the coronavirus pandemic compounded the economic woes of the country.

China is already one of the biggest investors in various infrastructure projects in Sri Lanka. But there has been criticism, both locally and internationally, and growing concerns that China has lured Sri Lanka into a debt trap.

The previous Maithripala Sirisena government had entered into a 99-year lease with China in 2017 as a settlement of its debt by way of equity.

Officials said the visit was made possible by a travel bubble created for the purpose and there will be strict adherence to COVID-19 protocols.

Sri Lanka’s economy, especially the tourism sector, has been hit hard since last year initially by the Easter Sunday attacks, which killed over 250 people and later by the ongoing coronavirus pandemic.

The country has so far reported 4,252 infections and 13 deaths.

The Reserve Bank of India in July this year signed necessary documents for extending a USD 400 million currency swap facility to Sri Lanka to boost the nation’s draining foreign exchange reserves due to the coronavirus pandemic.

The currency swap arrangement will remain available till November 2022.

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