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Sunday June 23rd, 2024

India tells IMF it strongly supports Sri Lanka’s debt restructuring efforts

ECONOMYNEXT – Ahead of a two-day official visit by India’s external affairs minister S Jaishankar, the Indian government has informed the International Monetary Fund (IMF) that it strongly supports Sri Lanka’s debt restructuring efforts in the latter’s bid to secure a 2.9 billion dollar extended fund facility (EFF).

“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.

The financing and debt relief will be provided by the Export-Import Bank of India, said Mishra in his letter.

According to the official, India will continue to negotiate with the Sri Lankan government and with the Paris Club on a medium-to-long term debt treatment through maturity extension and interest rate reduction or any other financial operations that would deliver similar financing/debt relief.

“We understand that the IMF’s debt sustainability assessment will be underpinned by the programme targets of (i) reducing the ratio of public debt to GDP to below 95 percent by 2032, the central government’s annual gross financing needs below 13 percent of GDP on average in 2027-32, and the central government’s annual foreign currency debt service below 4.5 percent of GDP in every year 2027-32; and (ii) closing Sri Lanka’s external financing gap,” the letter to the IMF managing director said.

“We would like to stress that the Sri Lankan authorities are expected to seek equitable debt treatments from all commercial creditors and other official bilateral creditors, as well as adequate financing contributions from the multilateral development banks. We stand ready to support your efforts on these,” it said.

The Indian official added that his government looks forward to cordial and in-depth discussions with the Sri Lankan authorities, the IMF and the Paris Club with a view to finalising the specifics of the matter in the coming weeks.

The letter ahead of a planned visit by India’s External Affairs Minister S Jaishankar who is scheduled to engage in official discussions with Sri Lanka President Ranil Wickremesinghe, Prime Minister Dinesh Gunawardena, Foreign Minister Ali Sabry and other officials.

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.

Opposition MP Harsha de Silva, who tweeted a copy of the letter Wednesday evening, thanked India for helping Sri Lanka restructure its debt to the emerging superpower adding that he assumes China will follow suit.

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.

Related:

Chinese embassy fumes over US ambassador’s remarks on Sri Lanka debt

(Colombo/Jan19/2023)

 

 

 

Comments (1)

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  1. sacre blieu says:

    So, when is the money coming? We see many countries expressing support, and not going beyond words reflecting their no confidence with the current kind of politics and politricks. the underlining issue is that the scheduled elections should take place first.

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  1. sacre blieu says:

    So, when is the money coming? We see many countries expressing support, and not going beyond words reflecting their no confidence with the current kind of politics and politricks. the underlining issue is that the scheduled elections should take place first.

India supports Sri Lanka Coast Guard to boost maritime security

ECONOMYNEXT – India has given 1.2 million US dollars’ worth spare parts to Sri Lanka’s Coast Guard to be used in a vessel also gifted to the Indian Ocean Island on an earlier occasion, the Indian High Commission in Colombo said.

“Handing over of the large consignment of spares symbolizes India’s commitment to support capability building towards addressing the shared challenges of Maritime Security in the region,” the Indian High Commission said

The spare parts were brought to Sri Lanka on the Indian Coast Guard Ship Sachet, an offshore patrol vessel that was on a two-day visit to the island.

The spares were formally handed over to the Sri Lanka Coast Guard Ship Suraksha which was gifted to Sri Lanka in October 2017 by India.

India has gifted spare parts for the ship in June 2021 and April 2022 and also provided assistance in refilling of Halon cylinders in January 2024. (Colombo/June23/2024)

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Sri Lanka Water Board makes profits, tax-payers inject Rs28bn

ECONOMYNEXT – Sri Lanka’s state-run National Water Supply and Drainage Board has made a profit of 5.2 billion rupees in the year to December 2023, after a tariff increase despite not getting money for 25 percent of its water it pumps out.

Total revenues went up to 61.8 billion rupees in 2023 from 35.4 billion rupees, a Finance Ministry report said.

Water revenue surged to 58.5 billion rupees from 33.1 billion rupees, cost of sales also went up to 32.8 billion rupees from 23.14 billion rupees, helping boost gross profits from 12.3 billion rupees to 29.0 billion rupees.

Finance costs surged to 14.9 billion rupees from 3.9 billion rupees,

NSWD reported net profits of 5.2 billion rupees for the year, against a loss of 2.7 billion rupees a year earlier.

The Treasury had given 28 billion rupees from tax payer money to settle loans.

During the Rajapaksa administration, macroeconomists who ran the Finance Ministry made state enterprises borrow money from banks through Treasury guarantees listing them as ‘contingent liabilities’, claiming they were ‘off balance sheet’.

The Road Development Authority, which had no revenues to speak of borrowed large amounts of money from banks which were listed as ‘contingent liabilities’ though they were a responsibility of the state from day one, allowing macroeconomists to understate both the budget deficit and national debt, critics say.

The water tariffs were raised by 81 percent after macroeconomists printed money to supress interest rates for flexible inflation targeting/potential output targeting. The currency collapsed after macroeconomists tried to float the rupee with a surrender rule in place.

Non-revenue water for which no money is collected was 25.2 percent. The agency was supposed to reduce non-revenue water. In some districts religious establishments are responsible for non-revenue water, according to an official who said it on condition of anonymity.

The water board is also unable to collect money from some services like common toilets for underserved communities. (Colombo/June23/2024 – Update II)

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Sri Lanka will expedite Indian projects: President

ECONOMYNEXT – Sri Lanka will expedite Indian-backed projects in the island, President Ranil Wickremesinghe told Indian business people after a visit by Indian External Affairs Minister S Jaishankar this week.

“I discussed with Prime Minister Modi the need to accelerate the joint program that we have decided, agreed on. So the major ones are identified, and Foreign Minister Jaishankar came down today [20] to have a discussion. Now this will show the new path we are taking,” president Ranil Wickremesinghe said.

“It won’t be individual projects. We’ve discussed a fair number of them. First is the grid interconnection between Sri Lanka and India, so that sustainable energy can be transmitted to India.

“We have the Sampur solar power project, which is a Government to Government (G2G) project, and a three island project, which is where we hope the ground breaking can take place in July,” he told Indian business people at the 31st All India Partner’s Meet 2024 (AIPM 2024), held at ICT Ratnadipa in Colombo.

The AIPM 2024 which was organised by KPGM Sri Lanka and India provided a platform for both countries to reaffirm their commitment to collaborative projects that promise to redefine bilateral relations and propel socio-economic growth.

“It’s a great pleasure and a privilege to have you in Sri Lanka, in Colombo, holding this meeting. It shows on one hand the close friendship that our two countries have, and on the other hand, the confidence that you have in Sri Lanka.

“Having now survived two difficult years, I must acknowledge that this was possible because India gave us a loan of $3.5 billion. All that will be repaid.”

Cooperation between the two nations needed to be enhanced, particularly in the energy sector, aiming to foster new development for the Northern region, Wickremesinghe said.

“We are looking at developing Palk Straight for wind energy and solar energy, both countries to get together and have a large farm for solar energy, for renewable energy. It also means that we will have a new economy for the northern province, which was worst affected by the war.”

Several Indian-backed projects in Sri Lanka have stalled due to protests from some parties, with some going to courts.

India is helping expand the Kankesanturai port, and is discussing development of the Palali and Colombo airports.

The National Livestock Development Board of Sri Lanka, in collaboration with India’s Amul Dairy Company, is involved in a project to enhance liquid milk production in the country.

The two nations are also considering establishing land connectivity.

Discussions have also taken place regarding expediting the Trincomalee Development Project, which encompasses industrial investment zones and tourist areas.

“Plans are underway to construct a multi-product oil pipeline from Nagapatnam to Trincomalee, pending the final observation report. Trincomalee is poised to become a hub for oil refining, with the development of ports and investment zones, transforming Trincomalee Port into a significant hub on the Bay of Bengal.

“Today, the entire East Coast is being opened up for tourism, with additional land earmarked for hotels in Galle and southern areas. Moreover, there are plans to establish more investment zones across the country, alongside expanding our professional training programs. In these endeavours, we are collaborating closely with India.” (Colombo/Jun22/2024)

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