Delhi grants Colombo fresh economic aid
Amid a worsening crisis, Sri Lanka meets with International Monetary Fund, while India continues to provide financial assistance. Meanwhile, anti-government protests show no sign of abating with demonstrators blocking roads and railways.
Colombo (AsiaNews) – Sri Lanka has asked India for assistance to secure approximately US$ 3 billion in “bridging finance” as the island nation negotiates with the International Monetary Fund (IMF) this week for a bailout programme to deal with its current severe economic crisis.
Last week, Sri Lanka announced that it would default on its external debt until a bailout is received from the IMF. Economic analysts told AsiaNews that the move was attributed to the country’s extremely low foreign exchange reserves. They are of the view that this is the first time Sri Lanka announced a debt default during the post-independence era.
According to political analysts, during a meeting with Indian Finance Minister Nirmala Sitharaman last week, Sri Lanka’s High Commissioner to India Milinda Moragoda expressed his gratitude to India for its provision of US$ 2.4 billion in credit lines for essential goods such as food, fuel and medicines, including a debt waiver for the first quarter of this year.
During the meeting, India emphasised the possibility of helping Sri Lanka gain international support to secure bridging finance and also for the economic adjustment programme through bilateral and multilateral partners.
India is also exploring the possibility of enhancing as well as restructuring some of the assistance it has already provided, such as credits for essential commodities and fuel as well as balance of payment support.
According to political analysts, Ms Sitharam was concerned about the humanitarian cost of the economic crisis and said that “India would stand by Sri Lanka to overcome its challenges.”
Ms Sitharaman and her Sri Lankan counterpart, Finance Minister Ali Sabry, are expected to hold a tête-à-tête on the sidelines of the IMF meetings in Washington this week.
High Commissioner Moragoda also discussed having economic cooperation supervised by both Indian and Sri Lankan teams, including members of Sri Lanka’s Presidential Advisory Group on Multilateral Engagement and Debt Sustainability, the secretary to the Ministry of Treasury, and the governor of the Central Bank along with Indian Chief Economic Advisor V. Anantha Nageswaran and Economic Affairs Secretary Ajay Seth.
As Moragoda pointed out, India was the first country to provide Sri Lanka with assistance in these “challenging times”. This has included several shipments of fuel and wheat flour worth up to US$ 1.5 billion under two lines of credit it extended in January this year. The Reserve Bank of India also cleared a currency swap arrangement of US$ 400 million.
The Indian government has agreed to a long-pending request to defer Sri Lanka’s debt repayment for the first quarter of 2022, while Sri Lanka has requested a further period of debt moratorium, which New Delhi is considering but has not yet decided.
The island nation of 22 million has been hit by its worst economic crisis with power cuts and fuel shortages which have brought protesters out onto the streets, including the Galle Face Green, Colombo. This has resulted in mounting pressure on President Gotabaya Rajapaksa.
In the past two weeks, protests against the Rajapaksa administration have spread across the country. Many roads were blocked yesterday, especially in major towns with protesters demanding concessions.
Trains on the main railway line were also delayed yesterday morning as demonstrators blocked tracks. Buses on several routes were also unable to operate because of blocked roads.
Meanwhile, the Ceylon Petroleum Corporation (CPC) increased the price of fuel on Tuesday.