COLOMBO, SRI LANKA (AP) – India’s foreign minister said yesterday his country has given financial assurances to the International Monetary Fund (IMF) to facilitate a bailout plan to help neighbouring Sri Lanka emerge from its worst economic crisis, in a first formal announcement from one of the nation’s creditors.
India’s Foreign Minister S Jaishankar announced the support while on a two-day visit to Sri Lanka, where he met with President Ranil Wickremesinghe and other Cabinet ministers.
“We felt strongly that Sri Lanka’s creditors must take proactive steps to facilitate its recovery. India decided not to wait on others but to do what we believe is right. We extended financing assurances to the IMF to clear the way for Sri Lanka to move forward,” he said.
“Our expectation is that this will not only strengthen Sri Lanka’s position but ensure that all bilateral creditors are dealt with equally,” Jaishankar added.
He did not elaborate on the kind of assurances given.
Sri Lanka has a total foreign debt of USD51 billion and it must pay back USD28 billion by 2027. However, the island nation announced it was suspending repayment of USD7 billion that was due last year amid a serious foreign currency shortage.
India’s official credit to Sri Lanka is USD4.4 billion excluding other forms of lending.
Among Sri Lanka’s leading creditors are Japan and China.
Sri Lanka and the IMF have reached a preliminary agreement on a USD2.9-billion bailout plan over four years, but final approval depends on assurances given by creditors on the debt restructuring.
The currency crisis and resultant shortages of food, medicine, fuel and cooking gas sparked riots last year, forcing the president to flee the country and later resign.
Sri Lanka has since has shown some signs of progress with shortages reduced and day-to-day functions restored. However, daily power cuts continue due to the fuel shortage and the government is struggling to find money to pay government employees’ salaries and conduct other administrative functions.