India says ‘ready to help Sri Lanka in rapid economic recovery’ | Business and Business News

A senior Indian official has held talks with Sri Lanka’s president and prime minister as India signals its willingness to go beyond the $4 billion in loans, swaps and aid it has already extended to its cash-strapped neighbor.

Sri Lanka is facing its worst economic crisis in seven decades, with a severe foreign exchange shortage hampering imports of essentials such as food, fuel and medicines.

The island nation off the tip of south-east India needs about $5 billion over the next six months to meet the basic needs of its 22 million people who are struggling with long queues, worsening congestion and power outages.

Indian Foreign Minister Vinay Kwatra, accompanied by Treasury officials, held talks with President Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe in the commercial capital Colombo, officials said on Thursday.

“Underlined that India stands ready to assist Sri Lanka in rapid economic recovery by promoting investment, connectivity and strengthening economic ties,” Indian Foreign Ministry spokesman Arindam Bagchi wrote on Twitter.

The Indian team held a separate meeting with central bank governor Wickremesinghe and Treasury officials, an official from the prime minister’s office said.

“The delegation will also hold talks with senior officials on the economic situation in the country and short- and long-term assistance needs,” Sri Lanka’s Foreign Ministry said in a statement.

India has been the top source of foreign aid to Sri Lanka this year, providing more than $4 billion, Wickremesinghe told parliament this week.

Neighbors are also in talks for additional support, including a $500 million credit line for fuel and help import fertilizer and rice, while Sri Lanka tries to stave off a food crisis, officials said.

Sri Lanka plans to hold a pledging conference with China, India and Japan, Wickremesinghe said, while continuing talks with the International Monetary Fund over a bailout package worth about $3 billion.

A critical foreign exchange shortage and galloping inflation have made life difficult for the 22 million inhabitants of the South Asian country.

In the economic crisis in Colombo, vehicles are lined up for gasoline [File: Dinuka Liyanawatte/Reuters]

Economy ‘has collapsed’: PM

Meanwhile, Sri Lanka’s parliament canceled its remaining sessions for the week to conserve fuel, officials said Thursday, as a catastrophic economic crisis rapidly depleted the island nation’s already tight fuel supplies.

Parliament officials said politicians decided not to hold meetings on Thursday and Friday to avoid wasting fuel, days after authorities closed schools and some state offices for the same reason.

Wickremesinghe told Parliament on Wednesday the country’s economy had “collapsed” and was facing “a far more serious situation” than the shortages alone, as he warned of “a possible plunge to rock bottom”.

“Our economy has completely collapsed,” he said. “We are now facing a far more serious situation that goes beyond the mere shortage of fuel, gas, electricity and food.”

Energy Minister Kanchana Wijesekera said a petrol delivery due for Thursday has been delayed and urged motorists to travel less.

“Limited amounts of fuel will be distributed to the pumping stations today and tomorrow,” he told reporters in Colombo, where motorists have been queuing for days to fill up their tanks.

Economists and other Sri Lankans said they hoped the government would find ways to revitalize the economy.

“What the Prime Minister should be doing is not making any announcements. He must develop a plan to reactivate the system,” said WA Wijewardena, economist and former Deputy Governor of the Bank of Sri Lanka.

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