The hopes and expectations of receiving the Extended Finance Facility (EFF) of US$ 2.9 billion from the IMF in December or January is unlikely, the Sunday times reported.
Even obtaining it in March next year is doubtful as it is dependent on demonstrating the country’s foreign debt sustainability by restructuring the foreign debt of about US$ 51 billion.
China that holds about US$ 5.1 billion or about ten percent of the country’s debt is unwilling to restructure her debt. It is however willing to give further assistance and loans.
The prospect of the People’s Republic of China agreeing to a restructuring of its debt is unlikely. The Chinese government has said it is opposed to restructuring its debt, but is willing to give a fresh loan.
The rationale for this is that there is a great deal of debt owed by many less developed countries to China, and if they were to agree to a restructuring of the Sri Lankan debt, they would be obliged to restructure the debt to other countries as well.
The complexity of the issue lies in the interplay of geopolitics. The Chinese would not want Sri Lanka to be dependent on the IMF and follow its policies. Therefore they are likely to block Sri Lanka obtaining an IMF facility.
On the other hand, China’s geopolitical strategy would be to enhance Sri Lanka’s dependence on China. Their alternate suggestion may be a bailout package with Chinese financial and commodity assistance.
