India supports Sri Lanka’s application for a much-needed IMF rescue package

24 April, 2022 | Riya Girdhar

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Nirmala Sitharaman, India's finance minister, has assured her Sri Lankan counterpart Ali Sabry that India will completely assist the island nation's discussions with the IMF.

India has reaffirmed its complete support for the International Monitory Fund’s Extended Fund Facility, which is helping Sri Lanka overcome its worst-ever economic crisis (EFF).

According to Sri Lanka’s Finance Ministry, India’s Finance Minister Nirmala Sitharaman has assured her Sri Lankan colleague Ali Sabry that India will fully support the island nation’s discussions with the IMF, particularly on the special request for accelerating the EFF.

On Monday, Sitharaman and the Indian economic delegation met with Sabry at the IMF headquarters in Washington.

The ministry stated “ Sitharaman has assured Sabry on India’s full support to Sri Lanka to move forward and has emphasised on India’s commitment to strengthen the development of the economy in Sri Lanka and building stronger bonds between the two nations as they move forward together”

Sri Lanka has applied to the International Monetary Fund (IMF) for a Rapid Financing Instrument (RFI), and the IMF has told the country’s Finance Minister that India has also applied for an RFI on Sri Lanka’s behalf.

The International Monetary Fund (IMF) has praised Sri Lanka for the actions it has already made to alleviate its financial crisis and pledged its complete assistance. According to the ministry, a favourable reaction has also been obtained to speed up the process of strengthening the help given to Sri Lanka.

Faced with a burning crisis involving depleted dollar reserves and inflation, Sri Lanka is completely reliant on the assistance of neighbouring countries such as India, as well as an IMF bailout package, to avoid the worst economic consequences, which would have resulted in social and political unrest in the country.

The country’s foreign debt due for this year exceeds $7 billion with only $1.6 billion on hand. India provided almost $2.5 billion in currency swaps and other aid to Sri Lanka in the first quarter of 2022, including food, gasoline, and medicines.