No new financial support for Sri Lanka, says India

New Delhi/Colombo September 15 (Reuters): – India does not plan to provide new financial support to Sri Lanka on top of the nearly $4 billion it has given this year, two sources told Reuters, as the island’s struggling economy begins to stabilize after a preliminary loan agreement with the IMF.

India has been the biggest aid provider this year to its southern neighbour, which is battling its worst economic crisis in more than seven decades and struggling to pay for its imports, although the situation is now less serious than it was only between May and July.

“We have already granted $3.8 billion in aid. Now it’s all about the IMF,” an Indian government source with direct knowledge of discussions with Sri Lanka told Reuters. “Countries cannot continue to provide aid.”

A Sri Lankan government source said India’s move came as no surprise and that New Delhi had ‘signalled’ them a few months ago that there would be little more widespread support for come.

The source, however, said India would be invited to a donors’ conference which Sri Lanka was planning to hold with Japan, China and possibly South Korea later this year.

Another Sri Lankan government source said talks between India and Sri Lanka for a $1 billion swap deal and its request for a second $500 million line of credit to buy fuel , made in May, had made little progress.

The sources declined to be named, as they were not authorized to speak to the media.

India’s finance ministry, Sri Lanka’s finance ministry and its central bank did not immediately respond to requests for comment.

Sri Lanka and the IMF reached a preliminary agreement in early September for a loan of about $2.9 billion, which is conditional on the country obtaining assurances of financing from official creditors and negotiations with private creditors.

“Our focus is more on pushing the IMF program forward and getting out of this mess on our own,” one of the Sri Lankan sources said.

Sri Lanka has struggled to use its limited foreign exchange reserves to meet fuel imports and reallocate funds from multilateral agencies to other essential imports, including fertilizers, cooking gas and medicine, it said. the other Sri Lankan source.

The country of 22 million people has been grappling with shortages of essentials, including fuel, food and medicine, for months after its foreign exchange reserves fell to record lows, stalling imports and stoking tensions. unprecedented public unrest.

(Writing by Devjyot Ghoshal; Editing by Krishna N. Das and Raju Gopalakrishnan)

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