India assured Sri Lanka of all help regarding food and medical aid following requests from Colombo. India told Sri Lanka that it is participating in a proposed aid consortium consisting of Asian giants China and Japan, people familiar with developments have told Moneycontrol.
“Earlier requests from the country were for debt restructuring, financial aid, and lines of credit. But the fast deteriorating scenario has led to fears of a full-blown food crisis if the situation doesn’t change fast,” people mentioned above told Moneycontrol.
The people mentioned above also said Colombo is leaning on its closest neighbor seeking food security for its citizens in case the need arises. They said India will ship food packages and other rations to Colombo as it did during the Covid-19 pandemic where it sent essential items to several nations during the initial phase of the pandemic or like it sent shipments to Afghanistan following the Taliban takeover and in the aftermath of deadly earthquake last month that killed over a thousand people.
Sri Lanka is in turmoil after the government failed to address the economic collapse which has threatened its citizen’s access to food, fuel and essential medicines. It further exacerbated the condition by choosing to pay them back with more money borrowed from China.
Sri Lanka is negotiating with India for a $1-billion currency swap with the Reserve Bank of India (RBI), the Moneycontrol report said. New Delhi apprised Colombo that notwithstanding the situation a stable political regime needs to be in power to ensure smooth bailout discussions with the IMF.
India till date provided around $5 billion worth of assistance to Sri Lanka, of which $3.8 billion was provided in 2022 itself. A $400-million currency swap in January, deferral of a $500-million loan repayment, and two lines of credit (LoC) totaling $1.5 billion is the assistance India provided as the nation was defaulting on its debts.
The line of credit India sent contained $1 billion for importing food, medicine and essential items. The $500 million was for importing petrol products.
Sri Lankan officials told New Delhi that the funds were depleted soon and it is unlikely that New Delhi will provide similar LoCs soon, at least until there is some semblance of stability or until a new government is ushered in which will bring in economic reforms.
Sri Lanka defaulted on its total international debt of $51 billion leading to an economic collapse. Sri Lankan president Gotabaya Rajapaksa fearing reprisal has tendered his resignation. Continuous protests are being held at Colombo demanding a new government and swift measures to address the crisis.
(with inputs from Moneycontrol)
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