India said on Tuesday it had opened talks with Sri Lanka to restructure its debt and pledged to support the crisis-hit neighbor mainly through long-term investment after providing nearly $4 billion in financial aid. Sri Lanka, a tourism-dependent South Asian country of 22 million people, is grappling with its worst economic crisis in more than seven decades, which has led to shortages of essentials and the ouster of a president.
Earlier this month, the country reached a tentative agreement with the International Monetary Fund on a loan of about $2.9 billion, provided it receives financial guarantees from official creditors and negotiates with private lenders. India’s High Commission in Colombo said it held the first round of debt talks with Sri Lankan officials on September 16.
“The discussions held in a cordial atmosphere symbolize India’s support for the early conclusion and approval of an appropriate IMF program for Sri Lanka,” the High Commission said. Sri Lanka will appear before its international creditors on Friday to outline the full extent of its economic problems and debt restructuring plans. The Indian High Commission also said that Delhi would continue to support Colombo “in all possible ways, especially by promoting long-term investment from India in key economic sectors”.
India’s support to Sri Lanka this year included a $400 million currency swap, a $1 billion line of credit for essential goods and $500 million for fuel. In addition, India also deferred payment for imports from Sri Lanka of about US$1.2 billion and provided a credit line of US$55 million for fertilizer imports. India had no plans to provide new financial support to Sri Lanka as the island’s battered economy began to stabilise.
The high commission said India has about $3.5 billion worth of ongoing development projects in Sri Lanka, whose president earlier this month asked his officials to resolve obstacles to Indian-backed projects. He did not specify the obstacles or the projects. President Ranil Wickemesinghe said Sri Lanka will transform the free trade agreement with India into a comprehensive economic and technological partnership.
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