India to ‘encourage greater investments’ in crisis-hit Sri Lanka

Sri Lanka’s worst-ever economic crisis is seeing a shortage of foreign currency, runaway inflation and a steep recession.

India Sri Lanka
Sri Lankan President Ranil Wickremesinghe, right, with India’s foreign minister S Jaishankar in Colombo [Sri Lankan President's Office via AP]

India has told Sri Lanka it is committed to boosting investment in its debt-ridden neighbour to help pull it from its worst economic crisis in seven decades.

“India will encourage greater investments in the Sri Lankan economy, especially in core areas like energy, tourism and infrastructure,” India’s Foreign Minister Subrahmanyam Jaishankar told reporters in Colombo on Friday.

“We count on the government of Sri Lanka to provide a more business-friendly environment to create a powerful pull factor.”

The island nation, home to 22 million people, has grappled with challenges over the past year ranging from a shortage of foreign currency to runaway inflation and a steep recession, in its worst such crisis since independence from Britain in 1948.

During his two-day trip starting on Thursday, Jaishankar held talks with his Sri Lankan counterpart, Ali Sabry, on cooperation in infrastructure, connectivity, energy, industry and health services.

The Indian minister also met Sri Lanka’s President Ranil Wickremesinghe on Friday.

During the visit, the neighbours are expected to sign a memorandum of understanding for a renewable power project covering three islands in Sri Lanka’s north, two sources at the Ministry of Power said.

Sri Lanka is racing to secure a $2.9bn bailout package from the International Monetary Fund but requires the backing of China and India, its biggest bilateral lenders, to reach a final agreement with the IMF.

India has told the global lender that it strongly supports Sri Lanka’s debt restructuring plan, with Sri Lanka owing about$1bn to its nearest neighbour.

“We felt strongly that Sri Lanka’s creditors should take proactive steps to facilitate its recovery,” Jaishankar said.

“India decided not to wait on others but to do what we believe is right. We extended financial assurances to the IMF to clear the way for Sri Lanka to move forward.”

China is Sri Lanka’s largest bilateral lender and the last remaining major creditor to yet to agree to the plan.

Sri Lanka owed Chinese lenders $7.4bn, or nearly a fifth of its public external debt, by the end of last year, calculations by the China Africa Research Initiative show.

Source: Reuters