Big Chinese-backed bank pumped money to “rescue” Sri Lanka?

According to the news agency Reutersthis review comes after Sri Lanka requested foreign exchange liquidity assistance to state banks from lenders.

Last week, Sri Lanka’s Finance Minister Ali Sabry said that due to the hard hit caused by the pandemic, rising oil prices and tax cuts from the government of President Gotabaya Rajapaksa, the South Asian island nation’s economy is growing fell into crisis, with usable foreign exchange reserves down to $50 million.

A man counts Sri Lankan rupees at a money changer in Colombo – Photo: REUTERS

Shortages of imported food, energy and medicine have sent thousands of people into the streets of Sri Lanka over the past few weeks. President Rajapaksa had to declare a state of emergency twice because of the continuous violence, in which the second declaration took place on May 6, which will last for 5 weeks.

The AIIB is a multilateral banking institution established in 2014 to promote investment in infrastructure across Asia, attracting the majority of funding from China. China is also Sri Lanka’s largest bilateral lender with an outstanding balance of $6.5 billion.

Beijing had previously extended Sri Lanka a $1.3 billion syndicated loan and a $1.5 billion yuan swap to increase the country’s reserves. According to Reuters, Currently, the two countries are negotiating a credit line of $1.5 billion and a new syndicated loan of up to $1 billion.