sri lanka news: India to step up aid as Sri Lanka faces bankruptcy

India is expected to step up its economic assistance to Sri Lanka as the country is on the brink of bankruptcy and its usable foreign exchange reserves have shrunk to less than $50 million.

The new assistance could focus on humanitarian requirements and both governments are in close contact, ET has learned. The Lankan government has sought the supply of urea from India. India has previously supplied fuel, medicine and rice.

The Sri Lankan Cabinet recently approved a proposal to get more fuel from India, through a $200 million short-term loan from India’s Exim Bank. India has provided almost $3 billion to cash-strapped Sri Lanka since January 2022, through currency swaps, lines of credit for essential items and loan deferrals.

On Friday, Lanka’s bus and train networks were brought to a standstill as offices and factories stood empty in a nationwide strike demanding the government resign.

Sri Lanka’s economy is in dire straits with its usable foreign exchange reserves below $50 million, the country’s finance minister said on Wednesday.

Finance Minister Ali Sabry addressed Parliament after returning to Sri Lanka from talks with the International Monetary Fund.

He said any IMF rescue programme, including a quick financing instrument needed to urgently resolve shortages of essential goods, would depend on debt restructuring negotiations with creditors and would take six months to implement. The country must pay back $7 billion this year of the $25 billion in foreign loans it is scheduled to pay off by 2026.

Sabry, who resigned on April 4, a day after being appointed, only to return, warned that “we’ve been overspending two and a half times.” “In 2021, total income was 1,500 billion (Sri Lankan) rupees… expenditure was 3,522 billion rupees… we were living (beyond) our means…” he said, warning parliamentarians that help from the World Bank or the IMF would not solve deep-seated problems. problems.

“The IMF is not Aladdin’s magic lamp,” he said. Last week, the World Bank said it would provide $600 million in aid to help Sri Lanka meet payment requirements for essential imports.

On Thursday, Sabry told Parliament that Sri Lanka lost around 500,000 taxpayers each in 2020 and 2021 after untimely tax cuts were implemented. Prolonged and intermittent lockdowns caused by the pandemic have prevented the economy from achieving what was originally expected from tax cuts, Sabry claimed.


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