India begins talks to support crisis-hit Sri Lanka’s debt restructuring initiatives

INDIA said on Tuesday (20) it had begun talks with Sri Lanka on restructuring its debt and vowed to support its neighbour mainly through long-term investments after providing nearly $4 billion (£3.5bn) of financial aid.

Sri Lanka is struggling with its worst economic crisis in more than seven decades, which has led to shortages of essentials and

the ouster of a president.

The country earlier this month reached a preliminary deal with the International Monetary Fund (IMF) for a loan of about $2.9bn (£2.5bn) contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

The High Commission of India in Colombo said it held the first round of debt talks with Sri Lankan officials last Friday (16).

“The discussions held in a cordial atmosphere symbolise India’s support to early conclusion and approval of a suitable IMF programme for Sri Lanka,” the High Commission said.

Sri Lanka will make a presentation to its international creditors on Friday (23), laying out the extent of its economic troubles and plans for a debt restructuring.

The Indian High Commission also said New Delhi would continue to support Colombo “in all possible ways, in particular by promoting long-term investments from India in key economic sectors”.

India’s support to Sri Lanka this year has included a $400 million (£351m) currency swap, a $1bn (£879m) credit line for essential goods and a $500m (£439m) line for fuel. In addition,

India has also deferred payment on Sri Lankan imports of about $1.2bn (£1.05bn) and given a credit line of $55m (£48m) for fertiliser imports.

Reuters reported last week, citing sources, that India did not plan to provide fresh financial support to Sri Lanka, as the island’s battered economy had begun to stabilise.

The High Commission said India

had ongoing development projects worth about $3.5bn (£3bn) in Sri Lanka, whose president Ranil Wickremesinghe earlier this month asked his officials to resolve obstacles to projects backed by India, without giving details.

President has said Sri Lanka will turn a free trade agreement with India into a comprehensive economic and technological partnership.