India starts debt-restructuring talks with Sri Lanka

India said on Tuesday it had begun talks with Sri Lanka on restructuring its debt and promised to support the crisis-hit neighbour mainly through long-term investments after providing nearly $4 billion of financial aid.

Sri Lanka, a tourism-dependent South Asian country of 22 million, is struggling with its worst economic crisis in more than seven decades, which has led to shortages of essentials and the ouster of a president.

The country earlier this month reached a preliminary deal with the International Monetary Fund for a loan of about $2.9 billion contingent on it receiving financing assurances from official creditors and negotiations with private creditors.

The High Commission of India in Colombo said it held the first round of debt talks with Sri Lankan officials on Sept. 16.

“The discussions held in a cordial atmosphere symbolise India’s support to early conclusion and approval of a suitable IMF programme for Sri Lanka,” the High Commission said.

Sri Lanka will make a presentation to its international creditors on Friday, laying out the full extent of its economic troubles and plans for a debt restructuring. 

The Indian High Commission also said New Delhi would continue to support Colombo “in all possible ways, in particular by promoting long-term investments from India in key economic sectors”.

India’s support to Sri Lanka this year has included a $400 million currency swap, a $1 billion credit line for essential goods and a $500 million line for fuel. In addition, India has also deferred payment on Sri Lankan imports of about $1.2 billion and given a credit line of $55 million for fertiliser imports.

Reuters reported last week, citing sources, that India did not plan to provide fresh financial support to Sri Lanka, as the island’s battered economy had begun to stabilise. 

The High Commission said India had ongoing development projects worth about $3.5 billion in Sri Lanka, whose president earlier this month asked his officials to resolve obstacles to projects backed by India. He did not specify the obstacles or the projects.

President Ranil Wickremesinghe has said Sri Lanka will turn a free trade agreement with India into a comprehensive economic and technological partnership.

Source: Reuters

--Agencies