China, Sri Lanka’s ‘all-weather friend’, is now displaying low-key approach to island’s economic meltdown – which could upend IMF debt discussions

Sri Lanka’s prime minister Ranil Wickremesinghe is hoping China, India and other creditors will help his bankrupt nation keep going until an IMF bailout

But Beijing’s immediate cash outlay will not stretch far; Wickremesinghe expects to meet China’s ambassador in the coming days, for more clarity

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Protesters in Colombo, Sri Lanka shout slogans on Saturday during an anti-government protest about the nation’s worst ever economic crisis. Photo: EPA-EFE

Published: 8:30am, 30 May 2022Updated: 9:40am, 30 May 2022

Sri Lanka’s Prime Minister Ranil Wickremesinghe has said he is expecting China, along with India and other creditor nations, to help keep the island’s bankrupt economy afloat until the government can clinch an International Monetary Fund (IMF) bailout and tackle its huge foreign debt.

So far, though, China, hitherto considered an “all-weather friend” by Sri Lanka – which belongs to its flagship Belt and Road Initiative – has displayed a low-key approach to the island’s economic meltdown that has triggered mass protests over widespread food, fuel and other shortages, 10-hour power cuts and soaring inflation.

China has offered to lend a “few hundred million dollars” for essential imports and early-stage talks are under way for more loans, Wickremesinghe, who has assumed the crucial finance job in his shaky unity government, told The Financial Times late last week.

But China’s immediate cash outlay will not go far as Sri Lanka needs US$500 million in foreign exchange each month to cover basic imports, according to the central bank, and foreign exchange reserves are “running on fumes” at near zero, a government official said.

Ranil Wickremesinghe, Sri Lanka’s prime minister. Photo: Bloomberg

Wickremesinghe expects to meet China’s ambassador in the coming days and get more clarity on what Beijing is offering. He said it is still unknown whether China will accept Colombo’s plan to treat all creditors equally as it seeks to fast-track talks with the IMF for around US$4 billion in help for this year.

This, economists say, is where Colombo’s turnaround efforts could come unstuck.