At a time when Sri Lanka is facing an unprecedented economic fiasco, the country’s finance ministry said that in the four months through April India has emerged as a top lender for the island nation.
India’s disbursements of foreign loans and grants from January 1 to April 30, 2022 were 376.9 USD million compared to China which was only 67.9 USD million.
India has come to rescue Sri Lanka which is currently under a severe economic crisis. The island country is facing an acute shortage of foreign currency along with food and fuel crisis.
“In February 2022, India and Sri Lanka signed an agreement for a USD 500 million supply of petroleum products from the Indian Oil Company through a credit line, this was expanded by a further USD 200 million in April,” the country’s finance ministry report said.
“Whilst these credit lines have provided important supply channels, CeylonPetroleum Corporation (CPC) continues to face significant difficulties in procuring adequate fuel largely due to limitations in the availability of foreign exchange and external financing challenges,” it added.
Sri Lankan Government has made arrangements to mobilize foreign financing of USD 1,550.5 million by entering into 4 agreements with foreign development partners and lending agencies from 1st January to 30th April 2022, to support the public investment program. One agreement was of USD 1,500.0 million of Export credit Facilities extended by the EXIM Bank and State bank of India for the import of essential commodities.
As of April 30, 2022, the total undisbursed balance of foreign financing available from already committed loans that are to be utilized in the next 3-5 years, was USD 8,054.3 million.
India has the majority of the balance to be disbursed followed by, the Asian Development Bank, World Bank, China, and Japan respectively.
ADB came in as the second largest lender with USD 359.6 million being disbursed in the first four months, followed by the World Bank with USD 67.3 million.
India also emerged as the first responder under Prime Minister Narendra Modi’s neighbourhood first policy when Sri Lanka was left alone by its so-called benefactors for funding support.
Despite wide expectations, China’s unwillingness or the reluctance to come to the rescue of Sri Lanka when it needed the most raised many eyebrows.
On the other side, under the ‘neighbourhood first policy’, India has responded with urgency to the government of Sri Lanka’s request for assistance in overcoming hardships and will enhance economic linkages between the two countries be it through infrastructure connectivity and renewable energy.
In line with its “neighbourhood first” policy, India has been highly active to help Sri Lanka during its economic crisis.