Additional $500 Million From India After China Turns Away From Sri Lanka

NEW DELHI (IANS) -“A friend in need is a friend indeed” is the saying. The dictum is in full play as India has offered Sri Lanka an additional $500 million to help it to import fuel while it is in an advance stage of discussion with the International Monetary Fund for a bailout package.

Sri Lanka, which is grappling with one of the worst-ever foreign exchange crisis and shortage of essential commodities, was extremely disappointed when China declined to come forward in support of the country on flimsy grounds.

The fresh $500 million additional support by India to Colombo is over and above $ 1.5 billion of credit line offered by India earlier.

The economic situation in Sri Lanka is dire and it had requested both India and China for support in these difficult times.

India responded with an additional $500 million for the time being as against Colombo’s request for $ 1 billion, but China cited difficulties in supporting the country.

The $31 million of Chinese humanitarian assistance to Colombo is a diplomatic way of denial rather than genuine support.

Sri Lanka had asked $ 1 billion loan and $ 1.5 billion buyer’s credit from China and the so called “humanitarian assistance” is of no avail for a country which is facing difficulties in importing even essential commodities.

Sri Lanka needs at least $4 billion to meet its immediate debt service and import requirements.

After last week’s announcement by Colombo about imminent default of $ 35.5 billion in foreign debt by it due to disruptions caused by Covid-19 pandemic and Ukraine war, it started pro-active deliberations with the IMF for a bailout package.

Sri Lanka has to repay about $ 7 billion this year in debt servicing and other obligations. It has sought $ 4 billion of multilateral assistance from the IMF.

India has also supported Sri Lanka’s efforts in this regard. Many analysts view that had China come forward with a supporting hand, Colombo could have averted default and succeeded in tiding over its economic malaise till it could manage to get a bailout package from the IMF. Instead, China showed an indifference much to the dismay of Colombo.

Meanwhile, Sri Lankan government is confronting widespread public protests which initially demanded resignation from the Prime Minister Mahinda Rajapaksa and President Gotabaya Rajapaksa and are now demanding to form an interim government to tackle the economic crisis.

China, which invested in mega projects in the country and pushed it into debt-trap was now giving pretext of “difficulties” rather than providing support.