Govt. takes over $ 1.7 b in SOE debt owed to China

AFP: Crisis-hit Sri Lanka said yesterday it would take responsibility for $ 1.7 billion owed to China by State enterprises as it seeks to sell them off and restructure its foreign debt to secure an IMF bailout.

Wickremesinghe said $ 1.7 billion in loans taken from China’s Export-Import Bank by three key loss-making state-owned enterprises (SOE) – the electricity utility, Port Authority, and Airport and Aviation Services – would be considered government debt.

Taking the loans off their books will strengthen their balance sheets, which could make them more attractive to buyers or outside investors.

Wickremesinghe, who is also the Finance Minister, signalled the selling-off of five state-owned companies, including the national carrier SriLankan Airlines – which has debts of more than $ 1 billion – to reduce the strain on the national budget.

Proceeds from the “restructure” of the companies will be used to boost the country’s depleted foreign reserves, he said, without giving estimates.

The Government is in talks with the Washington-based lender as it seeks funding to enable the island to recover from its worst-ever financial crisis.

Sri Lanka defaulted on its foreign debt in April and the IMF has said its borrowings must be “sustainable” to unlock any new external funding.

That will require its creditors to take a haircut on their loans, but China is its biggest lender and Beijing has given no indication it is willing to do so.

The IMF has said the country should also restructure its loss-making state enterprises.

The government revised its external debt figure down from $ 51 billion to $ 46 billion.

Just over $ 14 billion of that is bilateral debt owed to foreign governments, of which China holds 52%.