Tuesday, September 27, 2022

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India overtakes China in the race of supporting Sri Lanka

For the past five years (2017-2021) China has been the largest bilateral lender to Sri Lanka. In 2021, China disbursed a total of $ 947 million, out of which $ 809 million was obtained as market borrowings from the China Development Bank, according to public finance.lk

It said the Asian Development Bank (ADB) has been the largest multilateral lender in the past five years and disbursed funds amounting to $ 610 million in 2021.

In the first four months of 2022 a total of $ 968 million has been disbursed. The largest bilateral lender in this period was India. Disbursements from India ($ 377 million) and ADB ($ 360 million) account for 76% of total disbursements in the first four months of 2022.

However India does not plan to provide fresh financial support to Sri Lanka on top of the nearly $4 billion it has extended this year, two official sources said , as the island’s battered economy starts to stabilize after a preliminary loan agreement with the IMF.

India has been the biggest provider of aid this year to its southern neighbour, which is fighting its worst economic crisis in more than seven decades and struggling to pay for imports, although the situation now is less severe than it was between May and July.

“India has already given $3.8 billion worth of assistance. Now it’s all about the IMF,” an Indian government source with direct knowledge of discussions with Sri Lanka said adding that . “Countries can’t keep giving assistance.”

A Sri Lankan government source said India’s decision was not a surprise and that New Delhi had “signalled” to them a few months ago that there would be little further large-scale support forthcoming.

The source, however, said that India would be invited to a donor conference that Sri Lanka was planning to hold with Japan, China and possibly, South Korea, later this year.

Another Sri Lankan government source said that talks between India and Sri Lanka for a $1 billion swap arrangement and its request for a second $500 million credit line to purchase fuel, made in May, had made little headway.

Sri Lanka and the IMF reached a preliminary agreement in early September for a loan of about $2.9 billion, which is contingent on the country receiving financing assurances from official creditors and negotiations with private creditors.

“Our focus is more on taking forward the IMF programme and getting ourselves out of this mess on our own,” said one of the Sri Lankan sources

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