Sri Lanka secures $1.5 billion Chinese loan

COLOMBO: Sri Lanka and China have signed a $1.5 billion currency swap deal, the island nation’s central bank said on Tuesday, as it struggles with a major foreign exchange crisis and debt repayments. Colombo had been negotiating for months to secure credit from China — its largest single source of imports — as the island’s foreign reserves plummet amid the pandemic. Chinese influence in the South Asian nation has been growing in recent years, through loans and projects under its vast Belt and Road infrastructure initiative, raising concerns among regional powers and Western nations. The Central Bank of Sri Lanka said the three-year swap arrangement for 10 billion yuan with the People’s Bank of China was “with a view to promoting bilateral trade and direct investment for economic development of the two countries”. Officials said talks were also under way to secure another $700 million from the China Development Bank. Sri Lanka’s economy was already reeling from the deadly 2019 Easter bombings, with the coronavirus epidemic and lockdowns further weighing on growth. The country contracted by a record 3.9 per cent last year. Foreign reserves fell to $4.5 billion in February from $8.0 billion a year ago, despite Sri Lanka banning the import of luxury goods, vehicles and food commodities. — AFP