Beijing: China's loans to Sri Lanka have been a contentious subject, with fears that the government would struggle to repay them and that Beijing would use them to challenge India and US influence in the Indo-Pacific region.

Debt-ridden Sri Lanka has approached China for assistance in restructuring loan repayments in order to save its faltering economy, reported The Singapore Post.

According to a statement from the President's office, Sri Lankan President Gotabaya Rajapaksa told visiting Chinese Foreign Minister Wang Yi that "it would be a great relief to the country if attention could be paid to restructuring the debt repayments as a solution to the economic crisis that has arisen in the face of the COVID-19 pandemic."

According to central bank data, Sri Lanka owed China $3.5 billion by the end of 2020, excluding loans to state-owned firms.

Sri Lanka's fourth-largest lender is China, and the country is expected to repay $4.5 billion in debt in 2022, beginning with a $500 million international sovereign bond repayment on January 18.

Rajapaksa also asked China to establish a concessional trade-credit plan for Chinese imports and to aid in enabling Chinese visitors to visit Sri Lanka under the bio-bubble concept, said the statement.

As it faces approaching maturities and a growing balance of payments crisis, Sri Lanka sees the potential of additional loans from China to assist satisfy its debt service commitments, according to the Central Bank Governor, reported the news outlet.

Sri Lanka's credit rating has been downgraded by Fitch Ratings and Moody's Investors Service due to delays in obtaining new funds, which are necessary to satisfy loan commitments. Sri Lanka is on the verge of defaulting.

According to figures issued by the Central Bank of Sri Lanka, the country's inflation rate reached a new high of 11.1 per cent in November 2021, with food inflation reaching 16.9.

A drop in the local currency, which plummeted by 7.5 per cent against the US dollar in 2021, prompted the price rise.

China has lent Sri Lanka more than $5 billion for highways, ports, an airport, and a coal power plant during the last decade. However, opponents claim that the funds were utilised for low-return white elephant projects, which China denies.

Sri Lanka is also an important element of Beijing's Belt and Road Initiative (BRI), a long-term strategy to fund and construct infrastructure that connects China and the rest of the globe. Other countries, particularly the United States, have criticised the BRI, calling it a "debt trap" for developing countries, reported the news outlet.

Former US Secretary of State Mike Pompeo has also advised Sri Lanka against doing business with China, calling the Communist Party of China a "predator" that continues to violate sovereignty on land and at sea.