COLOMBO: India’s Foreign Minister S. Jaishankar on Monday assured Sri Lanka of his government’s “continued cooperation and understanding” toward its neighbor, as the island nation faces its worst economic crisis in decades.
Sri Lanka is struggling to pay for essential imports, as it faces a 70 percent drop in foreign exchange reserves since January 2020, which has led to a currency devaluation.
New Delhi extended a $1 billion line of credit to Sri Lanka this month to help pay for critical imports, on top of a $400 million currency swap and a $500 million credit line for fuel purchases earlier this year.
Jaishankar met President Gotabaya Rajapaksa on Monday as part of his visit to Colombo, where the two reviewed the countries’ “close neighborly relationship.”
“Assured him of India’s continued cooperation and understanding,” Jaishankar said in a tweet.
Rajapaksa also thanked India for providing the credit line during the occasion, which he described as an “invaluable assistance.”
In an earlier meeting with Sri Lankan Finance Minister Basil Rajapaksa, Jaishankar said India “will continue to be guided by Neighborhood First,” referring to his country’s foreign policy focus on its South Asian neighbors.
As Sri Lankan imports stalled after foreign currency reserves fell to $2.31 billion by February, the country has been facing shortages of many essential items, including food, fuel and pharmaceuticals.
The nation just off India’s southern tip must repay about $4 billion in debt in the rest of 2022, including a $1 billion international sovereign bond that matures in July.
The government said it will seek an International Monetary Fund bailout to restructure its foreign debt as it also seeks more loans to overcome its currency crisis, though some doubt the effectiveness of this approach.
“These small loans from China and India are not going to help Sri Lanka,” Azath Salley, former governor for the Western Province and leader of the National Unity Alliance, told Arab News.
“We should have a master plan to overcome this crisis.”