India begins debt restructuring talks with Sri Lanka, pledges support

A man travels on a train as the port of Colombo is seen, amid the country’s economic crisis in Colombo, Sri Lanka, April 20, 2022. REUTERS/Dinuka Liyanawatte

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COLOMBO, Sept 20 (Reuters) – India said on Tuesday it had started talks with Sri Lanka on debt restructuring and promised to support the beleaguered neighbor mainly through long-term investments after providing nearly $4 billion in financial assistance.

Sri Lanka, a South Asian country of 22 million people dependent on tourism, is grappling with its worst economic crisis in more than seven decades, which has led to shortages of essential goods and the crowding out of a President.

Earlier this month, the country reached a preliminary agreement with the International Monetary Fund for a loan of around $2.9 billion subject to it receiving assurances of funding from official creditors and negotiations with creditors. private.

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India’s high commission in Colombo said it held the first round of debt talks with Sri Lankan officials on September 16.

“The discussions held in a cordial atmosphere symbolize India’s support for the speedy conclusion and approval of a proper IMF program for Sri Lanka,” the High Commission said.

Sri Lanka will make a presentation to its international creditors on Friday, outlining the full extent of its economic difficulties and its debt restructuring plans. Read more

The Indian High Commission also said New Delhi would continue to support Colombo “in every possible way, including by promoting India’s long-term investments in key economic sectors.”

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

Reuters reported last week, citing sources, that India was not considering providing further financial support to Sri Lanka as the island’s struggling economy had begun to stabilize. Read more

The high commission said India has ongoing development projects worth about $3.5 billion in Sri Lanka, which the president earlier this month told his officials to address the obstacles projects supported by India. He did not specify the obstacles or the plans.

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

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Reporting by Uditha Jayasinghe; Written by Krishna N. Das; Editing by Andrew Heavens and Mark Heinrich

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