India extends $900 million ‘facilities’ to ailing Sri Lankan economy

India has extended $900 million facilities to Sri Lanka, the Indian High Commission in Colombo said,  as the island country has been going through its worst economic crisis, with record low foreign exchange reserves and food shortages

Jan 13, 2022
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India-Sri Lanka

India has extended $900 million facilities to Sri Lanka, the Indian High Commission in Colombo said,  as the island country has been going through its worst economic crisis, with record low foreign exchange reserves and food shortages.

On Thursday, the Indian High Commissioner to Colombo Gopal Baglay met Sri Lanka’s Central Bank Governor Ajith Nivard Cabraal and expressed “India’s strong support” to Sri Lanka “in the wake of Reserve Bank of India extending over $900 million facilities.”

“These include deferment of Asian Clearing Union settlement of over US$ 500 million and a currency swap of US$ 400 million,” the high commission said in a tweet on Friday. Coincidentally, New Delhi’s assistance came last week at the time when the Chinese Foreign Minister Wang Yi was on his two-day visit to Sri Lanka. 

Last week, S Jaishankar, India’s minister for external affairs, had also had a phone call with his Sri Lankan counterpart G L Peiris. The assistance came a week after the two governments had signed a crucial deal on Trincomalee Oil Farm, extending India’s control over 14 oil tanks for 50 more years. 

Significant, Basit Rajapaksa, the powerful Finance minister in the Rajapaksa government, had also visited India in November and held talks on possible assistance. At the time, the Sri Lankan Embassy in New Delhi had said that India had offered assurance to take care of Sri Lanka’s food and energy security. 

In recent weeks, both Fitch Ratings and Standard and Poor’s downgraded its sovereign rating to “CCC” and expressed doubt over the country’s ability to service its external obligations. However, Central Bank Governor Nivard Cabraal said, “There will be no default, disorderly or otherwise. We do not want to promote a default culture.”  

Sri Lanka is also in touch with China for further loans and restructuring of old debts. Beijing said it would extend the help to the best of the country’s capacity.

 (SAM)

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