India’s Assurances to IMF Backing Sri Lanka

With the country's economy in trouble due to a lack of foreign currency and civil unrest, Sri Lanka declared its first-ever debt default in April, 2022. The biggest crisis since gaining independence from Britain in 1948 has hit the island nation of 22 million people hard in the past year. To escape from its greatest financial crisis in seven decades, Sri Lanka needs the support of China and India, its two largest bilateral lenders, in order to receive a USD 2.9 billion bridging loan from the International Monetary Fund (IMF), therefore Sri Lanka has been negotiating to obtain these. Recent correspondence between India's Ministry of Finance and IMF confirmed that India has agreed to assist in reducing Sri Lanka's debt as part of a proposed IMF-supported initiative aimed at helping the island nation recover from its current economic crisis. External Affairs Minister S Jaishankar delivered the necessary assurances to Sri Lanka's top leadership during his recent visit to Colombo for the much-needed IMF rescue package. Sri Lanka's Central Bank Governor Nandalal Weerasinghe expressed gratitude to India for providing the assurances required by the IMF to release the USD 2.9 billion bailout. Last year, India generously provided Sri Lanka with 4 billion US dollars to help the country deal with the problem. India remains the only creditor to have supported Sri Lanka's request for an IMF bailout. While this is going on, Sri Lanka has been trying to strengthen its economic policies by increasing revenue through tax increases and utility price hikes. Evidently, the government is doing everything in its power to alleviate the economic crisis, but only time will tell if the situation stabilizes.