Sri Lanka in talks for $100m emergency funding from Beijing-backed bank

A man counts Sri Lankan rupees at a currency exchange counter in Colombo September 4, 2015. REUTERS/Dinuka Liyanawatte

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COLOMBO, May 8 (Reuters) – The China-backed Asian Infrastructure Investment Bank is considering providing $100 million in emergency aid to Sri Lanka, the country’s finance ministry said on Sunday. .

Sri Lanka has asked the lender for foreign exchange liquidity support for state banks, it said in a statement.

Hit hard by the pandemic, rising oil prices and populist tax cuts by President Gotabaya Rajapaksa’s government, the South Asian island’s economy is in crisis, with dwindling usable foreign exchange reserves $50 million, Finance Minister Ali Sabry said last week.

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Shortages of imported food, fuel and medicine have taken thousands to the streets in more than a month of mostly peaceful protests. Rajapaksa on Friday declared a second state emergency in five weeks.

The multilateral AIIB, founded in 2014 to promote infrastructure investment across Asia, gets most of its funding from China.

China is Sri Lanka’s largest bilateral lender, with an outstanding balance of $6.5 billion, mostly lent over the past decade for major infrastructure projects, including highways, a port, an airport and a coal-fired power plant.

Beijing provided Sri Lanka with a $1.3 billion syndicated loan and a $1.5 billion yuan-denominated swap to boost its reserves. The two countries are in talks for a $1.5 billion line of credit and a new syndicated loan of up to $1 billion.

Colombo said this month that talks had started on Chinese debt refinancing after Sri Lanka suspended some foreign debt repayments in April.

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Reporting by Uditha Jayasinghe; Written by Alasdair Pal; Editing by Christian Schmollinger and William Mallard

Our standards: The Thomson Reuters Trust Principles.

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