India does not plan to provide Sri Lanka with fresh financial support in addition to the nearly $ 4 billion it extended this year, told Reuters two sources as the island’s aggrieved economy begins to stabilize after a preliminary loan deal with the IMF .
India was the largest aid provider this year to its southern neighbor, which has been battling its worst economic crisis in more than seven decades and struggling to pay for imports, although the situation is now less severe than in May-July.
“We’ve already provided $ 3.8 billion in aid. Now it’s all about the IMF, ”an Indian government source who has direct knowledge of discussions with Sri Lanka told Reuters. “Countries cannot continue to provide aid.”
A source in the Sri Lankan government said India’s decision was no surprise and that New Delhi “signaled” them a few months ago that there would be no further large-scale support.
However, the source said India would be invited to a donor conference Sri Lanka plans to hold with Japan, China and possibly South Korea later this year.
Another Sri Lankan government source said talks between India and Sri Lanka on a $ 1 billion swap deal and his request for a second $ 500 million credit line for fuel purchases, made in May, had made little progress.
Sources refused to name names as they were not allowed to speak to the media.
India’s Finance Ministry, Sri Lankan Finance Ministry and Central Bank did not immediately respond to requests for comment.
Sri Lanka and the IMF reached a provisional agreement in early September on a loan of approximately $ 2.9 billion, which is contingent on the country receiving a guarantee of funding from official creditors and negotiations with private creditors. read more
“Our goal is more to continue the IMF program and get out of this mess on our own,” said one Sri Lankan source.
Sri Lanka has worked to use its limited foreign exchange reserves to meet fuel imports and reallocate funds from multilateral agencies to other critical imports including fertilizers, cooking gas and medicine, a second Sri Lankan source said.
A country of 22 million has been struggling with a shortage of essentials, including fuel, food and drugs, for months after its foreign reserves fell to an all-time low, delaying imports and fueling unprecedented civil unrest.
RegisterWriting by Devjyot Ghoshal; Editing by Krishna N. Das and Raju Gopalakrishnan
Source: Reuters Trust Principles.