India plans no more funding for Sri Lanka as IMF talks progress

 

India does not plan to provide fresh financial support to Sri Lanka on top of the nearly $4 billion it has extended this year, two sources told Reuters, as the island’s battered economy starts to stabilise after a preliminary loan agreement with the IMF. 

Now it’s all about the IMF,” an Indian government source with direct knowledge of discussions with Sri Lanka told Reuters. A Sri Lankan government source said India’s decision was not a surprise and that New Delhi had “signalled” to them a few months ago that there would be little further large-scale support forthcoming. 

The source, however, said that India would be invited to a donor conference that Sri Lanka was planning to hold with Japan, China and possibly, South Korea, later this year. Another Sri Lankan government source said that talks between India and Sri Lanka for a $1 billion swap arrangement and its request for a second $500 million credit line to purchase fuel, made in May, had made little headway. 

Sri Lanka has worked to use its limited foreign exchange reserves to meet fuel imports and reallocate funding from multilateral agencies for other critical imports, including fertiliser, cooking gas and medicine, said the other Sri Lankan source.