A moratorium on the loan payments from China could significantly ease off the pressure on Sri Lanka’s external sector, rather than a debt moratorium from India.
According to media reports, Sri Lanka has requested India and China for a three-year debt moratorium.
“If you look at the Chinese debt component, it is six times larger than India’s. Therefore, it’s interesting to see what China’s reaction to this going to be,” First Capital Head of Research
Dimantha Mathew said.
First Capital estimated the overall outstanding debt to India at US $ 1 billion and US $ 6 billion to China.
Further, Sri Lanka has US $ 180-270 million of debt repayment obligations to India per annum on average while the debt repayment obligations to China are significantly high at US $ 600 million per annum.
“If China decides to grant a debt moratorium for Sri Lanka, it will have a significant impact towards the country,” he said. Although Sri Lanka’s debt repayments have somewhat slid down this year, First Capital expects the debt repayments to spike in 2021.