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Sri Lankan Finance Minister on a Trip to India to ask for $1 billion Bailout Assistance

Sri Lanka’s Finance Minister Mr Basil Rajapaksa left for New Delhi on the 15th of March to sign a new USD 1 billion bailout package assistance with India. Sri Lanka, currently undergoing a crippling economic condition is expecting a $1 billion loan from India to help its declining socio-political and economic infrastructure. The state-run Daily newspaper reported that the Finance Minister is accompanied by the Secretary to the Treasury, S.R. Attygalle. 

On Wednesday, Rajapaksa met Prime Minister Modi and discussed with him about the “initiatives being taken by both countries to increase bilateral economic cooperation, and conveyed his thanks for the support extended by India for the Sri Lankan economy”, a statement issued by the Ministry of External Affairs (MEA) said the same day. 

With a deteriorating economic crisis at hand, Sri Lanka is left to fend for. The inflation rate is currently at 15%- the highest in all of Asia, Sri Lanka’s suffering has also been affected by the Ukraine-Russia conflict going on. In February this year, New Delhi provided a short-span loan of $500 million to Colombo so that it can purchase petroleum products through the Ministry of Energy and the Ceylon Petroleum Corporation on behalf of the Sri Lankan government.

In November 2021, exactly three months before the February loan, India gave 100 tonnes of nano nitrogen liquid fertilisers to Sri Lanka because their government was not able to carry out the import of chemical fertilisers.

The rise in the borrowing costs along with the devaluing of their currency has led the governor of the Central Bank of Sri Lanka, Mr Ajith Nivard Cabral to urge restrictions on non-essential imports of approximately 300 items, from electronic appliances to apples and increments in fuel prices and power tariffs. 

Sri Lanka has also reached out to China besides India for bilateral credit lines to avoid an IMF bailout. However, the negotiation scenario is under complication because of the on-going conflict in Ukraine. Kenneth Akintewe, head of Asian Sovereign Debt has remarked that, “a restructuring is necessary as the debt levels are too high.” With a population of around 22 million, Sri Lanka needs to take a guided course of action.