March 27, 2023
Economy International

India Pledges Support to Ease Sri Lanka’s Debt Crisis

India willing to help Sri Lanka amidst economic crisis

India has pledged to help ease the debt burden of its neighbor Sri Lanka as part of a possible International Monetary Fund (IMF) program. The island nation of 22 million people has been facing a number of economic challenges in the past year including a shortage of foreign currency, runaway inflation and a steep recession. This is the worst economic crisis Sri Lanka has seen since its independence from Britain in 1948.

India has informed the IMF that it strongly supports Sri Lanka’s debt restructuring plan as the country seeks a $2.9 billion loan from the IMF. This support is crucial for Sri Lanka as it requires the backing of China and India, its biggest bilateral lenders, to reach a final agreement with the IMF. This agreement is essential to help the country emerge from its worst financial crisis in seven decades.

An IMF spokesperson stated that “Sri Lanka is engaged with other official bilateral creditors to obtain similar assurances.” Once adequate assurances are obtained and remaining requirements are met, including by the Sri Lankan authorities, a Fund-supported program for Sri Lanka can be presented to the IMF’s Executive Board for approval. This would unlock much needed financing for the country.

Sri Lanka’s economy has been hit hard by the COVID-19 pandemic, which has resulted in a decline in tourism and exports. The country is also facing a high fiscal deficit, a balance of payment crisis, and a rising debt burden. The support from India and potential IMF program will be crucial in helping the country recover from this crisis and achieve sustainable economic growth.

In conclusion, India’s commitment to helping ease Sri Lanka’s debt burden as part of a possible IMF program is a positive step towards addressing the economic challenges facing the island nation. The support from India and potential IMF program will be crucial in helping Sri Lanka recover from this crisis and achieve sustainable economic growth.

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