Sri Lanka is seeking India’s help in obtaining at least $3 billion in “bridging finance” from the international community ahead of the World Bank and International Monetary Fund Spring Meetings in Washington next week. Sri Lanka’s High Commissioner to India, Milinda Moragoda, commended India for providing $2.4 billion in credit lines for food, fuel, and pharmaceuticals, as well as a debt waiver for the first quarter, at a meeting with Finance Minister Nirmala Sitharaman on Wednesday.
“High Commissioner Moragoda and Minister Sitharaman discussed how India could assist Sri Lanka in securing international support for bridging finance and for the economic adjustment program itself, through both bilateral and multilateral partners,” according to the Sri Lankan High Commission. They also “explored the possibility of enhancing and restructuring some of the assistance already provided by India in the form of credits for essential commodities and fuel,” the Sri Lankan High Commission said. Ms. Sitharaman had expressed worry over the “humanitarian burden of the economic crisis” and said India will support Sri Lanka in overcoming its challenges, according to the statement.
Sri Lanka: India was the first to offer support to the island nation
Mr. Moragoda stated that India was the first to offer support to the island nation during these “difficult times.” Protests against the Rajapaksa regime have spread across the country in the last two weeks, as inflation has skyrocketed and currency reserves have plunged.
India has already dispatched multiple cargoes of fuel and wheat covered by two $1.5 billion lines of credit issued by New Delhi in January. The Reserve Bank also approved a $400 million currency exchange, and the government agreed to a long-awaited request to postpone Sri Lanka’s debt repayment for the first quarter. Sri Lanka has requested a new debt moratorium, which New Delhi is studying but has not yet made a decision on, according to an official.
Ms. Sitharaman was updated by Mr. Moragoda on Sri Lanka’s plan to default on its $51 billion external debt, which was announced on Tuesday, while the country works out its economic predicament with the IMF next week. Ms. Sitharaman and Sri Lankan Finance Minister Ali Sabry will both be in Washington, and a meeting is likely on the margins of the Spring meetings.
Mr. Sabry told Reuters last week that Colombo is looking for at least $3 billion in bridging funding for the next few months as the IMF and the World Bank negotiate debt restructuring and a new package of aid for the island. While India considers a request for additional financial assistance and a possible $500 million credit line for fuel, the Sri Lankan Ambassador to China has stated that his country is seeking a $1 billion loan from Beijing to service its debts to Chinese companies, as well as a $1.5 billion line of credit to purchase goods such as textiles, which are required for the garment export industry.
Mr. Moragoda also discussed the latest economic cooperation talks between the Sri Lankan Presidential Advisory Group on Multilateral Engagement and Debt Sustainability, the Governor of the Central Bank, the Secretary to the Treasury, and Indian Chief Economic Advisor V. Anantha Nageswaran and Secretary (Economic Affairs) Ajay Seth, which are being overseen by teams on both sides.