On Tuesday, India agreed to extend its $1 billion credit facility to Sri Lanka by a year after Colombo requested New Delhi for the same to mitigate its economic crisis.
Overview
According to the Indian High Commission in Sri Lanka, the “Amendment Agreement” is a part of New Delhi’s commitment to the welfare of Sri Lankans. It also said that the financial assistance would help the countries achieve “economic stabilisation and recovery.”
The diplomatic mission noted that the extension of the deal was agreed on in the presence of Minister of State for Finance Shehan Semasinghe, along with Indian diplomatic and Sri Lankan finance ministry officials.
Credit facility of USD 1 billion by India to Sri Lanka available for use till March 2024: Indian High commission to Sri Lanka statement pic.twitter.com/v6q117ANFp
— Sidhant Sibal (@sidhant) May 30, 2023
This is a part of the State Bank of India’s March 2023 credit facility extended to the Sri Lankan government to help it deal with its dire economic crisis.
Of the $1 billion, $576.75 million has already been utilised for imports. The extension pertains to the remaining $423.25 million, which Semasinghe confirmed will be used to import medicines till March 2024.
Past Assistance to Sri Lanka
Through its “Neighbourhood First Policy,” India seeks to support the upliftment and overall welfare of its neighbours and allies. In this regard, New Delhi has supported Colombo through various means in response to Sri Lanka’s economic crisis in 2022, where it faced unprecedented foreign exchange reserves that spiralled into a political crisis.
Consequently, last year, it provided Sri Lanka with $4 billion worth of economic aid through lines of credit to help it procure essentials such as food, fuel, and medicines. The recent $1 billion credit facility is a part of this assistance, which Colombo is using to procure essentials and industrial raw materials.
beyond the original duration, that is,till March 2024.The facility was extended by 🇮🇳 through @TheOfficialSBI in response to a specific request from GOSL and forms a part of the multi-pronged assistance of USD 4 billion provided by 🇮🇳 last year. (2/2)
— India in Sri Lanka (@IndiainSL) May 30, 2023
New Delhi also gave the crisis-struck island nation currency support and deferred loan payments.
To this end, Indian External Affairs Minister Dr S. Jaishankar said on Saturday that India did more for Sri Lanka through its “Neighbourhood First Policy” than the IMF did for the crises-struck country. He said the policy also seeks to help India’s “extended neighbourhood” in the Indian Ocean, Gulf countries, and South-East Asian nations.
With this, Jaishankar highlighted that the government is envisioning a “bigger, influential, and ambitious India.” He also said, “If you are the biggest in your neighbourhood, then it is in our interest that our other neighbours have a share in our prosperity, happiness and are linked to us.”