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India Backs Sri Lanka's IMF Debt Restructuring Plan: Report
Sri Lanka is experiencing its worst economic crisis since its independence from Britain in 1948 and policymakers have been dealing with a slew of issues over the last year, including a dollar shortage, rampant inflation and a steep recession
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India has informed the International Monetary Fund (IMF) that it will support Sri Lanka's debt restructuring plan, as the island nation races to secure a USD 2.9 billion bailout from the global lender, according to a media report.
The country of 22 million people is experiencing its worst economic crisis since its independence from Britain in 1948 and policymakers have been dealing with a slew of issues over the last year, including a dollar shortage, rampant inflation and a steep recession.
“India has written to the IMF,” the source said, declining to be identified because they are not authorised to speak to the media.
The Indian finance ministry's spokesperson declined to comment. The finance ministry in Sri Lanka did not immediately respond to a request for comment.
The support from New Delhi comes at a critical time for Sri Lanka, as it must put its massively indebted public finances in order to unlock the IMF loan agreed upon in September.
According to the source, Sri Lanka owes India approximately USD 1 billion, which will be included in the debt restructuring plan.
Separately, between January and July of last year, New Delhi provided Sri Lanka with approximately USD 4 billion in rapid assistance, including credit lines, a currency swap arrangement and deferred import payments.
“Talks with bilateral lenders, including India and China, to restructure Sri Lanka's debt are progressing well, and we hope to finalise IMF support in the first quarter of 2023,” Bandula Gunawardana, Sri Lanka's cabinet spokesperson, told reporters on Tuesday.
Before the IMF disburses funds, Sri Lanka must obtain prior financing assurances from creditors, reduce its massive debt burden, and increase public revenue, according to the IMF.
The IMF has emphasised the importance of joint talks between Sri Lanka's three main bilateral creditors, China, Japan and India.
On Tuesday, Sri Lanka's cabinet announced that it would cut recurrent budget expenditure by 6 per cent in 2023 and had approved a proposal to postpone salaries for some public employees to better manage the country's finances.