India says will support crisis-hit Sri Lanka’s economic recovery

COLOMBO (REUTERS, BLOOMBERG) – India’s top diplomat held talks with Sri Lanka’s president and prime minister on Thursday (June 23) as India signalled its willingness to go beyond the US$4 billion (S$5.6 billion) in loans, swaps and aid that it has already provided its cash-strapped neighbour.

Sri Lanka is facing its worst economic crisis in seven decades, with a severe foreign exchange shortage hampering the import of essentials including food, fuel and medicines.

The island nation off the tip of south-east India needs about US$5 billion in the next six months to cover basic necessities for its 22 million people, who have been struggling with long queues, worsening shortages and power cuts.

Indian Foreign Secretary Vinay Kwatra, accompanied by finance ministry officials, held talks with President Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe in the commercial capital Colombo, officials said.

“Underlined India stands ready to help Sri Lanka in quick economic recovery through promoting investments, connectivity and strengthening economic linkages, Indian Foreign Ministry spokesman Arindam Bagchi said on Twitter.

The Indian team held a separate meeting with Wickremesinghe, the Central Bank governor and finance ministry officials, an official from the prime minister’s office said.

“The delegation will also hold discussions with senior officials on the economic situation in the country and the short-term and long-term assistance requirements,” Sri Lanka’s foreign ministry said in a statement.

India has been the principal source of foreign assistance to Sri Lanka this year, supplying more than US$4 billion, Wickremesinghe told parliament this week.

The neighbours are also in talks for additional support including a US$500 million credit line for fuel and help with importing fertiliser and rice as Sri Lanka attempts to stave off a food crisis, officials said.

Thursday’s meeting comes after the country’s Prime Minister told Parliament on Wednesday that Sri Lanka’s economy has “completely collapsed” and an agreement with the International Monetary Fund (IMF) is the only path to revival. The nation is unable to purchase fuel, even for cash, and is seeing signs of a possible fall to rock bottom as shortages of fuel, food and electricity worsen.

Sri Lanka has reached out to several companies and countries, including Russia, for fuel supplies, according to the nation’s Energy Minister.

Sri Lanka needs about US$6 billion in aid from the IMF and other countries to tide over the next six months. The local authorities are looking to fast-track ongoing bailout talks with the Washington-based lender and are planning to hold a credit aid conference with friendly nations, including India, Japan and China to secure fresh funding.

The island nation’s economic activity has come to a near standstill with government offices and schools shut in order to conserve fuel.

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