As Sri Lanka’s battered economy begins to stabilize following a preliminary loan agreement with the IMF, two sources told Reuters that India does not intend to provide additional financial support beyond the nearly $4 billion it has extended this year.
This year, India has provided the most assistance to its southern neighbor, which is experiencing the worst economic crisis in more than seven decades and is having trouble paying for imports, despite the fact that the situation is currently less severe than it was between May and July.
“We have already provided assistance totaling $3.8 billion. An Indian government source with direct knowledge of discussions with Sri Lanka told Reuters that “now it’s all about the IMF.” Countries cannot continue to provide assistance.
India’s decision was not unexpected, according to a Sri Lankan government source, and New Delhi had “signalled” to them a few months ago that there would be little more large-scale support.
However, the source stated that India would be invited to a donor conference that Sri Lanka planned to hold later this year with Japan, China, and possibly South Korea.
According to another source from the Sri Lankan government, talks between India and Sri Lanka regarding a $1 billion swap arrangement and India’s request for a second $500 million credit line to purchase fuel, both of which were made in May, had not made much progress.
Since they were not permitted to speak with the media, the sources declined to provide their names.
Sri Lanka’s central bank and the finance ministry of India did not immediately respond to inquiries for comment.
At the beginning of September, Sri Lanka and the International Monetary Fund (IMF) reached a preliminary agreement for a loan of approximately $2.9 billion. This loan is contingent on Sri Lanka receiving financing assurances from official creditors and negotiating with private creditors.
One of the Sri Lankan sources stated, “Our focus is more on advancing the IMF program and getting ourselves out of this mess on our own.”
According to a different Sri Lankan source, Sri Lanka has worked to use its limited foreign exchange reserves to meet fuel imports and reallocate funding from multilateral agencies for other critical imports, such as fertilizer, cooking gas, and medicine. Additionally, Sri Lanka has worked to use its limited foreign exchange reserves to meet fuel imports.
After its foreign exchange reserves fell to record lows, stalling imports and stoking unprecedented public unrest, the nation of 22 million people has been struggling for months with a lack of essentials like fuel, food, and medicines.