India is willing to commit up to another $2 billion in financial assistance to Sri Lanka while also supporting the island nation with food and fuel, five sources told Reuters, as New Delhi tries to regain ground lost to China in recent years.
Sri Lanka, hit by its worst economic crisis since independence in 1948 and on the brink of its first debt default, has been asking friendly nations including India and China for credit lines, food, and energy. The Asian giants have already committed billions of dollars in financial support, the Reuters reported.
“We are definitely looking to help them out and are willing to offer more swap lines and loans,” said an Indian source aware of various discussions with Sri Lanka.
A senior government source in New Delhi said Sri Lanka’s warning on Tuesday, April 12, of defaulting on debt payments was a worry, but that “we can still give them up to $2 billion in swaps and support”.
Another source familiar with Sri Lanka’s thinking said it was seeking India’s help to roll over some $2 billion in dues, such as those owed to the South Asia-focused Asian Clearing Union. The source said the response had been positive from India.
All the sources had direct knowledge of the matter or had been briefed on it, but they declined to be named as the discussions were private.
India’s government and its central bank, as well as Sri Lanka’s foreign and finance ministries, did not immediately respond to requests for comment.
India has so far committed $1.9 billion to Sri Lanka in loans, credit lines, and currency swaps. Sri Lanka has also sought another $500-million credit line for fuel.
China has extended a $1.3-billion syndicated loan and a $1.5-billion yuan denominated swap, while negotiations are ongoing for more loans and credit lines.
One of the sources said New Delhi was keen for its southern neighbor to cut its reliance on China. Sri Lanka has an outstanding debt of about $3.5 billion with China – or 10.8% of the island’s total – and Beijing has also built ports and roads in the country.
“We want them to reduce their debt levels from China and we want to become stronger partners,” said the source.