Sri Lanka Seeks India’s Help in Obtaining Bridge Funding Amid Economic Crisis | world news
NEW DELHI: Sri Lanka has sought India’s help in securing international support to secure bridge financing as it begins negotiations with the International Monetary Fund (IMF) for a bailout package to deal with the the island nation’s worst economic crisis in decades.
The issue of India’s support to secure both the bridge financing and economic adjustment program with the IMF figured when Sri Lankan High Commissioner Milinda Moragoda met Finance Minister Nirmala Sitharaman in New Delhi on Wednesday. .
On Tuesday, Sri Lanka said it would default on its foreign debt pending an IMF bailout. This decision was attributed to the country’s extremely low foreign exchange reserves. It was the first time that Sri Lanka announced a default since its independence in 1948.
Besides looking at bilateral economic cooperation, Moragoda and Sitharaman discussed how India can help Sri Lanka secure international support to secure bridge financing and the economic adjustment program from the IMF itself, through bilateral and multilateral partners, according to a statement from the Sri Lankan High Commission. commission.
They also explored the possibility of improving and restructuring some of the aid already provided by India in the form of credits for essential commodities and fuel, as well as balance of payments support.
Moragoda and Sitharaman observed that the aid provided by India so far “could form part of the bridging financing required by Sri Lanka until the economic adjustment program with the IMF is negotiated”, indicates the communicated.
“It was also observed that India was the first country to support Sri Lanka in this way to secure bridge funding until this scheme is in place,” the statement added.
Sitharaman expressed concern about the humanitarian cost of the economic crisis and said “India will stand with Sri Lanka to overcome its challenges.” Moragoda thanked her for her personal interest in supporting Sri Lanka at this difficult time.
The process of negotiating a bailout with the Washington-based IMF is expected to take at least six months, if not longer. In the meantime, the Sri Lankan government will need to work out a bridge financing arrangement to meet its immediate needs.
Moragoda and Sitharaman noted that Sri Lanka’s Finance Minister Ali Sabry and his delegation will meet India’s ministerial delegation in Washington next week on the sidelines of the IMF’s Spring Meetings.
The envoy also thanked Sitharaman for India’s aid to Sri Lanka in the form of commodity and fuel credits, and balance of payments support.
So far, India has provided Sri Lanka with financial assistance worth nearly $2.5 billion, including a $500 million line of credit in February for fuel and a another $1 billion line of credit in March for the purchase of food, medicine and other essentials. India provided a $400 million currency swap under the Saarc facility and deferred payment of $515 million to the Asian Clearing Union.
On Tuesday, 11,000 tons of rice provided by India under the line of credit arrived in Colombo.
Moragoda briefed Sitharaman on the “debt freeze” announced by the Sri Lankan government and informed her that the Sri Lankan authorities were “seeking a consensual agreement on debt restructuring”.
Discussions also focused on how India can play a broader role in promoting accelerated growth and development in Sri Lanka in the medium term. Moragoda and Sitharaman expressed satisfaction with the ongoing official discussions between the two countries to establish a cooperation framework and monitor the progress of bilateral economic cooperation in the current context.
Sri Lanka’s Presidential Advisory Group on Multilateral Engagement and Debt Sustainability, the Governor of the Central Bank and the Treasury Secretary are engaged in these discussions, while India is represented by the Chief Economic Adviser and the Secretary (Economic Affairs) at the Ministry of Finance. The high commissions of the two countries are also participating in the discussions.
The economic crisis in this country of 22 million people has led to regular power cuts and shortages of food and fuel. The government has banned the import of non-essential items to conserve foreign currency reserves. The economic crisis has also sparked public protests, with protesters demanding the resignation of President Gotabaya Rajapaksa.