Sri Lanka urges China and India to reduce its debts

Cash-strapped Sri Lanka's central bank has urged China and India to agree a write-down of their loans as soon as possible.

The crisis-hit Island nation of 22 million people defaulted on its debt repayments and negotiated a $2.9bn bailout. But the International Monetary Fund (IMF) will not release the cash until China and India first agree to reduce Sri Lanka's billions of dollars of debt.

P. Nandalal Weerasinghe, the governor of Sri Lanka's central bank told it was in the interest of all parties to act quickly.

Weerasinghe said: "The sooner they give us finance assurances that would be better for both [sides], as a creditor, as a debtor."

"That will help us to start repaying their obligations," he added.

"We don't want to be in this kind of situation, not meeting the obligations, for too long. That is not good for the country and for us. That's not good for investor confidence in Sri Lanka."

Though inflation in the country has eased slightly since last year, food prices in Sri Lanka last month were still 65 per cent higher than a year earlier.

The World Food Programme (WFP) estimates that 8 million Sri Lankans - more than a third of the population - are "food insecure", with hunger especially concentrated in rural areas.

The economic turmoil sparked mass protests last year, which resulted in the former president fleeing the country in July.

The World Bank estimates that Sri Lanka's economy shrank by 9.2 per cent in 2022 and that it will contract by a further 4.2 per cent this year.

Beijing's lending to Sri Lanka stands at around $7bn while India is owed around $1bn.

The Sri Lankan government had initially hoped to agree a new payment plan with China and India by the end of last year.