Sri Lanka is said to have been in talks with China for credit support. The Chinese ambassador to Sri Lanka official said that the country was considering offering a $1.5bn credit facility and were also discussing a separate loan of up to $1bn which the Sri Lankan government had requested. He added that the South Asian nation was offered a loan of $500mn from the China Development Bank on March 18. The update comes just days after India has agreed to extend a $1bn line of credit to the country. Sri Lanka’s forex reserves have dipped to $2.31bn in February, down over 70% since the pandemic in 2020, and is under pressure regarding payment of its debts this year, including a $1bn dollar bond due in July. Recently, Sri Lanka agreed to work with the IMF after having ¬†ruled out an IMF bailout in January. IFR notes that China is Sri Lanka’s fourth biggest lender, after international financial markets, the ADB and Japan and the island nation is a key part of China’s Belt and Road Initiative. Some analysts have called this a ‘debt-trap diplomacy.

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