Sri Lanka stated on April 12 that it would suspend its $51 billion in foreign debt, the country’s worst economic crisis since its independence in 1948. The government has asked close countries like China and India for financial support.
As India strives to reclaim ground lost to China in recent years, it is ready to provide up to an additional $2 billion in financial aid to Sri Lanka and provide the island nation with food and fuel.
This year, the country must pay back $4 billion in foreign debt, including $1 billion in international government bonds, in July 2022. In March 2022, Sri Lanka’s foreign currency reserves were barely $1.93 billion. Since the country’s independence in 1948, this is the first time Sri Lanka has defaulted on its foreign debt.
China pledged to assist Sri Lanka in any way and is mulling a $2.5 billion loan to the South Asian nation. For $1.1 billion in debt, Sri Lanka agreed to let China lease the Hambantota port for 99 years.
According to a Reuters article on April 13, India can still provide swaps and support up to $2 billion in the event of Sri Lanka’s default. The info has remained unmentioned by the Indian government and banks and Sri Lanka’s Ministry of Finance and Ministry of Foreign Affairs.
A $1 billion concessional loan agreement was concluded between India and Sri Lanka in March. Subrahmanyam Jaishankar, the Indian Foreign Ministry, tweeted that the neighborhood first. India stands with Sri Lanka. A $1 billion credit line was signed to supply essential commodities. The key element of the package of support extended by India.
According to Reuters, Indian Prime Minister Narendra Modi wants to reduce its dependency on China, stating, “we want them to reduce their debt levels from China, and we want to become stronger partners.”
According to the Deccan Chronicle, as the situation worsens, India has dispatched ships carrying sugar, rice, and wheat, all of which it has in plenty, to Sri Lanka ahead of the Sinhala and Tamil New Years.