Sri Lanka begins crucial debt restructuring talks with China

Colombo: Sri Lanka's president said on Thursday his government has started debt restructuring discussions with China, an important step toward finalising an International Monetary Fund rescue of the island nation from a severe economic crisis.

President Ranil Wickremesinghe told Parliament on Thursday that initial talks will continue after China's Communist Party congress, which begins October 16.

Wickremesinghe, who recently returned from a trip to Tokyo, said the Japanese government had agreed to mediate the talks with China.

China has been supporting us from ancient times and we believe they will do the same in these difficult times, Wickremesinghe said.

Sri Lanka is nearly bankrupt and has suspended repaying its $51 billion foreign debt, of which it must repay $28 billion by 2027.

Sri Lanka has reached a preliminary agreement with the IMF for a $2.9 billion rescue package over four years. Its completion hinges on assurances from Sri Lanka's creditors on debt restructuring.

Separately on Thursday, Nandalal Weerasinghe, the governor of Sri Lanka's Central Bank, told reporters that steps have been taken towards debt restructuring.

Sri Lanka has made a presentation to global creditors and held meetings with financial advisors, donor countries and commercial creditors.

The discussions were going forward," Weerasinghe said. But he declined to discuss the progress of the discussions, saying he prefers to maintain a radio silence to avoid affecting markets. An announcement will be made once an agreement is reached, he said.

Sri Lanka borrowed heavily from China over the past decade for infrastructure projects that include a seaport, airport and a city being built on reclaimed land.