ECONOMYNEXT – India’s External Affairs Minister S Jaishankar has arrived in Colombo for a two-day official visit close on the heels of a written assurance provided to the International Monetary Fund of India’s strong support for Sri Lanka’s debt restructuring plans.
Jaishankar’s entourage includes senior officials from India’s ministry of external affairs and he is scheduled to meet President Ranil Wickremesinghe, Prime Minister Dinesh Gunawardena, Foreign Minister Ali Sabry and other officials.
Ahead of Jaishankar’s visit, the Indian government informed the IMF that it strongly supports Sri Lanka’s debt restructuring efforts in the latter’s bid to secure a 2.9 billion dollar bailout package over a four-year period.
“We hereby confirm our strong support for Sri Lanka’s prospective EFF-supported programme and commit to supporting Sri Lanka with financing/debt relief consistent with restoring Sri Lanka’s public debt sustainability under the IMF-supported programme and ensuring that the programme is fully financed as projected by IMF staff,” a letter dated January 16 and addressed to IMF chief Kristalina Georgieva by Indian finance ministry official Rajat Kumar Mishra said.
India’s decision to assist Sri Lanka was welcomed by the United States which said it stands ready to assist the island nation unlock the IMF’s extended fund facility (EFF) once all creditors come on board.
The financing and debt relief will be provided by the Export-Import Bank of India, said Mishra in his letter.
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India tells IMF it strongly supports Sri Lanka’s debt restructuring efforts
The government of Sri Lanka has yet to officially comment on India’s communication to the IMF as Sri Lanka awaits assurances from both India and China on their assistance with debt restructuring, a prerequisite for securing the IMF bailout.
IMF board approval for the EFF is contingent upon debt sustainability and a successful restructure of Sri Lanka’s external debt.
Tensions have been simmering between China and the West and regional power India over Sri Lanka, which all countries have expressed a strategic interest in, and all parties have made overtures to the island nation with regard to its worsening currency crisis since it blew up in early 2022.
Colombo owes Beijing some 7 billion US dollars while India is owed up to a billion. China has reportedly been reluctant to write down Sri Lanka’s debt because of possible implications to loans it has extended to other developing countries.
President Wickremesinghe, however, told parliament on Tuesday that talks with China and India have been successful.
“We will have an answer very soon,” he said.
A high level delegation of China’s Communist Party (CPC), led by Vice Minister Chen Zhou, Head of the CPC International Department called on Sri Lanka’s Prime Minister Dinesh Gunawardena on January 16.
“Sri Lanka is a very special friend of China and we are considering how we could assist Sri Lanka to get over the current crisis,” Chen Zhou was quoted as saying.
“You will have some good news soon.”
Meanwhile, the Chinese embassy in Colombo has taken umbrage at what it called the hypocrisy of US Ambassador Julie Chung for an alleged “China China China” mantra and for calling Beijing a “spoiler” in Sri Lanka’s negotiations with the global lender.
In a statement issued in not-uncharacteristically scathing and borderline undiplomatic language, the Chinese embassy chastised their “US colleague” for remarks she had made in a recent interview given to the BBC on Sri Lanka’s ongoing currency crisis.
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Chinese embassy fumes over US ambassador’s remarks on Sri Lanka debt
(Colombo/Jan19/2023)