By Uditha Jayasinghe
COLOMBO (Reuters) – Sri Lanka has reached an agreement with the Export-Import Bank of China to cover about $4.2 billion of the island nation’s outstanding debt, its finance ministry said in a statement on Thursday.
Sri Lanka is struggling with its worst financial crisis in more than seven decades after its foreign exchange dwindled to record lows, forcing the country to default on its foreign debt last May.
China is Sri Lanka’s largest bilateral creditor, owing about $7 billion.
Sri Lanka started negotiating with its bondholders and key bilateral creditors including China, Japan and India last September, parallel to moving forward on a $2.9 billion bailout from the International Monetary Fund (IMF).
The agreement with China EXIM Bank will assist Sri Lanka in getting past the first review of the IMF programme in the coming weeks and in securing release of the second IMF tranche of about $334 million, the statement said.
(Reporting by Uditha Jayasinghe; Writing by Tanvi Mehta; Editing by Kim Coghill and Edmund Klamann)
