NEW DELHI: India and Sri Lanka on Saturday reviewed progress in providing loans worth a total of $1.5 billion to the island nation for emergency purchases of food, medicine and supplies. fuel to overcome an economic crisis.
The matter featured in a virtual meeting between Foreign Minister S Jaishankar and Sri Lankan Finance Minister Basil Rajapaksa, who visited New Delhi last month to discuss a four-pronged financial aid package points.
Sri Lanka is grappling with a severe debt and currency crisis, which has been exacerbated by a drop in tourist arrivals due to the Covid-19 pandemic. Analysts believe that the rapid depletion of foreign exchange reserves could lead to a default on the payment of foreign debt.
Following a meeting between Indian envoy Gopal Baglay and Central Bank of Sri Lanka Governor Ajith Nivard Cabraal in Colombo on Thursday, India extended a currency swap facility by $400 million Saarc and deferred payment of $515.2 million to the Asian Clearing Union (ACU) for two months. to help Sri Lanka.
During their meeting, Jaishankar and Rajapaksa “reviewed the progress made in extending India’s $1 billion credit facility for importing food, essential items and medicine and $500 million dollars for importing fuel from India,” the foreign ministry said in a statement. Jaishankar tweeted that the two sides discussed “fast completion” of these loans.
The ministers “positively noted” the $400 million extension under the Saarc currency swap agreement and the postponement of the $515.2 million ACU settlement, the statement said.
Jaishankar also tweeted that India will be an “steadfast and reliable partner of Sri Lanka”. He said he assured Rajapaksa that India would take initiatives to support Sri Lanka at this important time along with other international partners.
The statement said India “has always supported Sri Lanka and will continue to support Sri Lanka in every way possible to overcome the economic and other challenges posed by the Covid-19 pandemic.” He added: “As close friends and maritime neighbours, India and Sri Lanka stand to gain from closer economic ties.”
The two ministers noted that the recent steps taken by the Sri Lankan government to jointly upgrade the Trincomalee Petroleum Park will boost investor confidence and enhance Sri Lanka’s energy security. They agreed to keep in touch to guide mutually beneficial economic cooperation.
Rajapaksa recalled India’s longstanding cooperation with Sri Lanka and “deeply appreciated the gestures of support”, according to the statement. He hailed India’s investments in several important areas including ports, infrastructure, energy, renewables, power and manufacturing, and assured Jaishankar that an enabling investment environment will be provided by Sri Lanka.
Sri Lanka last week signed an agreement with a subsidiary of the Indian Oil Corporation for the long-term renovation project of the British-era Trincomalee oil farm, an 850-acre storage facility with a capacity of almost a million tons. The Ports Authority of Sri Lanka and the Adani Group finalized an agreement last year to develop the western container terminal at the Port of Colombo.
Jaishankar also addressed the issue of Indian fishermen detained in Sri Lanka and urged Colombo to secure their speedy release as a humanitarian gesture.
India’s decision to provide financial assistance to Sri Lanka follows a visit to Sri Lanka last week by Chinese Foreign Minister Wang Yi, who told Colombo that no “third party” should s interfere in Sino-Sri Lankan relations. Much of Sri Lanka’s outstanding debt is held by China, which has provided subsidized loans worth billions of dollars that some experts say have thrust the island nation into a debt trap.
In a meeting with Wang, President Gotabaya Rajapaksa called on China to restructure debt repayments as a solution to the economic crisis. He also called for a concessional trade credit scheme for imports from China.