Sri Lanka being coerced into loan restructuring by China?

Ranil Wickremesinghe, the president of Sri Lanka, stated on Thursday that everyone should be able to navigate freely in the Indian Ocean region. Additionally, he mentioned that Sri Lanka was open to all navies, which may be a hint that Chinese ships are soon likely to visit Sri Lankan ports.

In addition, Wickremesinghe expressed regret that geopolitics had turned Sri Lanka into a “punching bag” and stated that Sri Lanka does not wish to take part in any “great power struggle” in the Indian Ocean region. He added that the Chinese run about 17 ports in the Indian Ocean, including the Hambantota Port, to support the arrival of a Chinese research ship at the Hambantota port.

What, therefore, drove Wickremesinghe to go on a rant about how the Indian Ocean is not unfettered and unrestricted? Is he sending a message to China, which has resisted demands to do so despite receiving multiple requests ever since Foreign Minister Wang Yi visited Colombo in January 2022?

Dhananjay Tripathi, Associate Professor in the Department of International Relations at South Asian University, Delhi, told India Narrative: “The timing of his statement is a bit confusing because the world including Japan is helping Sri Lanka come out of the crisis. Wickremesinghe may be posturing keeping Beijing in mind because China has not said anything about restructuring the loans it gave to Sri Lanka.”

As one of the conditions for an International Monetary Fund (IMF) bailout agreement, a deal on the restructuring of bilateral debts is crucial for Colombo. However, China has been evasive about restructuring its infrastructure loans, which allowed Colombo to construct the Lotus Tower, the Hambantota port, and an international airport that is currently idle.

Without approval from China over the bilateral debt restructure, Sri Lanka’s IMF bailout may encounter obstacles. India and Japan have agreed to restructure their debts, clearing the path for IMF assistance. Even now, Japan is leading efforts to call a conference of Sri Lanka’s creditors.

Media reports in Sri Lankan newspapers have said that India now hopes the IMF will take over. “India’s statement is not borne out of frustration. It is just fanciful to think that India alone will keep helping Sri Lanka in its financial crisis while the world watches. India has responded well as a neighbour at a time when the financial crisis was at its peak. Now, the international community has to pitch in and help,” says Tripathi

To assist it in restructuring its debt with its significant bilateral lenders, the island government has enlisted international advisors. But Sri Lanka is still figuring out how to appease a subdued China and strike a balance between competing interests.