india sri lanka news: India to step up aid as Sri Lanka nears bankruptcy

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India is expected to step up its economic aid to Sri Lanka as the country is on the verge of bankruptcy and its usable foreign exchange reserves have fallen below $50 million.

The new aid could focus on humanitarian needs and the two governments are in close contact, ET has learned. The Lankan government has sought to source urea from India. Previously, India provided fuel, medicine and rice.

Sri Lanka’s Cabinet recently approved a proposal to source more fuel from India, through a $200 million short-term loan facility from the Exim Bank of India. India has provided nearly $3 billion to cash-strapped Sri Lanka since January 2022, through currency swaps, lines of credit for essential commodities and loan deferrals

On Friday, Lanka’s bus and train networks came to a standstill as offices and factories stood empty in a nationwide strike demanding the resignation of the government.

Sri Lanka’s economy is in dire straits, with its usable foreign exchange reserves falling to less than $50 million, the country’s finance minister said on Wednesday.

Finance Minister Ali Sabry was addressing parliament after returning to Sri Lanka after talks with the International Monetary Fund.

He said any IMF rescue package, including a rapid financing instrument needed to urgently address shortages of essential goods, would depend on debt restructuring negotiations with creditors and would take six months to implement. . The country must repay $7 billion this year of the $25 billion in foreign loans it must repay by 2026.

Sabry – who resigned on April 4, a day after being appointed, to return – warned “we have spent two and a half times too much”. “In 2021, total income was 1.5 trillion (Sri Lankan) rupees…expenditure was 3.522 billion rupees…we were living (above) our means…” he said, warning Members that help from the World Bank or the IMF would not solve deep-rooted problems. problems.

“The IMF is not Aladdin’s magic lamp,” he said. Last week, the World Bank announced it would provide $600 million in aid to help Sri Lanka meet payment requirements for essential imports.

On Thursday, Sabry told parliament that Sri Lanka had lost around 500,000 taxpayers each in 2020 and 2021 after the ill-timed tax cuts were put in place. Prolonged and intermittent shutdowns caused by the pandemic have prevented the economy from achieving what was initially expected from tax cuts, Sabry said.

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