Active Development AidData Chinese Aid

China Eximbank suspends debt service payments under all loan agreements with Government of Sri Lanka in 2023 and 2024

Funder	Export-Import Bank of China (China Eximbank)
Recipient Organization	Government of Sri Lanka
Country	Sri Lanka
Start Date	Jan 01, 2023
End Date	Feb 21, 2026
Duration	1,147 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`107032`

Grant Description

On April 12, 2022, the Government of Sri Lanka announced a ‘pre-emptive’ sovereign debt default, noting that it would suspend debt service payments to all external creditors other than multilateral institutions.

Its decision to suspend external debt service reportedly affected all China Eximbank and China Development Bank (CDB) loans with amounts outstanding at the time of the announcement.

China Eximbank offered a 2-year principal and interest payment moratorium to the Government of Sri Lanka in January 2023.

Then, on October 11, 2023, China Eximbank and the Government of Sri Lanka signed an ‘agreement-in-principle’ regarding the key principles and indicative terms of a longer-term debt treatment. The ‘agreement-in-principle’ covered approximately $4.2 billion of outstanding debt. No details were disclosed about the terms and conditions.

However, the China Eximbank debt treatment was reportedly comparable to the debt treatment under discussion with the Official Creditor Committee (OCC), which involved a mix of long-term maturity extensions and interest rate reductions.

A public statement by Sri Lanka’s Ministry of Finance on October 11, 2023 also indicated that '[i]n the next few weeks, the Sri Lankan authorities and China [Eximbank] will actively work on formalizing and implementating the agreed parameters fo the debt treatment.' Then, in June 2024, Sri Lanka’s Ministry of Finance and China Eximbank signed a debt restructuring agreement, which extended a principal payment moratorium until 2028.

However, during this 4-year grace period (2024-2028), the Government of Sri Lanka agreed to make all interest payments that were due.

The June 2024 debt restructuring agreement also (a) rescheduled principal and interest payments between 2028 and 2043,and (b) set interest rates at no more than 2.1% during the 2028-2043 repayment period.

📋 Staff Comments

The June 2024 debt restructuring agreement appears to cover any/all China Eximbank loans that qualify as public and publicly-guaranteed (PPG) debt. However, this issue requires further investigation.
A Bloomberg publication (https://ca.finance.yahoo.com/news/sri-lanka-official-creditors-agree-114646884.html) at the time of the June 2024 debt restructuring indicated that the Government of Sri Lanka would repay restructured loans on ‘concessional terms’ between 2028 and 2043. However, it did not specify if the borrower was responsible for repaying the restructured loans with non-linear repayment schedules (i.e. where smaller principal payments are front-loaded and the larger principal payments are back-loaded). Yet other media reporting (https://www.ft.lk/front-page/Treasury-Secretary-sets-record-straight-over-debt-stock-and-EDR-deal/44-763845) suggests that the June 2024 debt restructuring agreement may involve non-linear repayment schedules. This issue warrants further investigation.

📚 Sources & References

Press Release 11.10.2023 Sri Lanka MINISTRY OF FINANCE
ECONOMIC STABILIZATION & NATIONAL POLICIES
Sri Lanka
China Agree to Restructure $4.2 Billion of Debt
Sri Lanka Gives China Deal Details
Keeping IMF Aid on Track
Sri Lanka CEXIM Press Release 11.10.2023
Sri Lanka says China debt deal covers $4.2 billion as other talks drag on
Misinformation Spread About Debt Restructuring and Related Matters
Sri Lanka Concludes Major Debt Restructuring Agreements
Clearing Path for Economic Recovery
China offers Sri Lanka debt moratorium
IMF help still in doubt
Sri Lanka Seals Debt Deal With China
Others After Crash
Treasury Secretary sets record straight over debt stock and EDR deal
Official EDR: No haircut but grace period, low interest rates
Sri Lanka Inks Final Pacts to Recast $10 Billion of Debt
China confirms two-year debt moratorium offered to Sri Lanka
China to place moratorium on all debts for 2-years Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.