Beleaguered Sri Lanka seeks fresh loans from India after New Delhi lends $1 billion

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<strong>Cash strapped Sri Lanka, with a debt burden of $6.9 billion this year, has sought another credit line of $1.5 billion from India to meet its import requirements. India has already provided $1.5 billion to Sri Lanka.</strong></p>
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In February, New Delhi provided $500 million to Colombo that helped the island nation in oil purchases. A $1 billion credit line was signed during Sri Lankan finance minister Basil Rajapaksa’s visit to New Delhi earlier this month.</p>
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External affairs minister S Jaishankar who is currently in Colombo to attend the seven nation Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Summit, assured Sri Lanka of continuous cooperation. He also met Sri Lanka’s President Gotabaya Rajapaksa and Prime Minister Mahindra Rajapaksa. The President also thanked Jaishankar for the invaluable assistance that his country received from India.</p>
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The Sri Lankan economy is facing a twin challenge of fast eroding foreign exchange reserves and surging inflation leading to the brink of bankruptcy. It has also sought assistance from China.</p>
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Meanwhile, the International Monetary Fund said that Sri Lanka was solvency issues because of risks stemming from unsustainable debt levels that jeopardize the nation’s economy, Bloomberg in a report said.</p>
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While initially Sri Lanka was hesitant in seeking assistance from the IMF, Colombo is now expected to initiate negotiations with the multilateral agency for a possible bailout package.</p>
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Sri Lanka’s foreign exchange reserves are currently at about $2 billion.</p>
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The deepening economic crisis in Sri Lanka has impacted prices of all essential items including food and medicines. The ongoing Russia-Ukraine crisis impacting fuel and commodity prices has further hit the island nation’s economy, prompting the Sri Lankan government to impose import restrictions on 367 items.  As the economic crisis deepens in Sri Lanka with rising inflation, shortage of food items and gas supply along with burgeoning debt levels, scores of citizens are looking to relocate to other countries.</p>