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

The worst economic crisis in Sri Lanka’s history is experiencing a shortage of foreign exchange, runaway inflation and a severe recession.

India has told Sri Lanka that it is committed to boosting investment in its indebted neighbor to help it emerge from its worst economic crisis in seven decades.

“India will encourage further investment in the Sri Lankan economy, especially in core areas such as energy, tourism and infrastructure,” Indian Foreign Minister Subrahmanyam Jaishankar told reporters in Colombo on Friday.

“We are counting on the Sri Lankan government to provide a more business-friendly environment to create a powerful pull factor.”

The island nation, home to 22 million people, has faced challenges over the past year, ranging from currency shortages to runaway inflation and a deep recession, in its worst crisis since independence from Britain in 1948.

During his two-day trip which began 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 with Sri Lankan President Ranil Wickremesinghe on Friday.

During the visit, the neighbors are expected to sign a memorandum of understanding for a renewable energy project covering three islands in northern Sri Lanka, two energy ministry sources said.

Sri Lanka is vying for a $2.9 billion rescue package from the International Monetary Fund, but needs the backing of China and India, its biggest bilateral lenders, to reach a final deal with the IMF.

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

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

“India decided not to wait for others but to do what we think is right. We extended financial guarantees 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 that has not yet agreed to the plan.

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

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