Some members on the committee of Sri Lanka’s official creditors are pushing to reach a deal to restructure the nation’s debt without the participation of China, according to people familiar with the matter, a move with potential implications for how richer nations handle financial stress in the developing world.
The members want the group of major creditors, including the US, Japan and India, to sign a memorandum of understanding with Sri Lanka around the time of the International Monetary Fund and World Bank meetings scheduled for next month in Marrakesh, Morocco, said the people, who asked not to be identified as the discussions are private. China, which held about 10% of Sri Lanka’s external debt as of the end of last year, isn’t a part of the group and is pursuing separate bilateral talks.
“All creditors are engaging positively with us,” Shehan Semasinghe, Sri Lanka’s junior finance minister, said by phone when asked about the development. How China will react to the deal remains to be seen. In the past China has quietly negotiated its own opaque restructurings with its debtors, often without providing any meaningful long-term relief.
Among the creditors, Paris Club members accounted for $4.8 billion, or more than 10% of Sri Lanka’s external debt, according to IMF data as of year end. That’s slightly higher than China, which stands at $4.5 billion, while India is owed $1.8 billion.
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