Sri Lanka will hold debt restructuring talks with India when External Affairs Minister S Jaishankar is expected to visit Colombo this week, President Ranil Wickremesinghe has said, as the cash-strapped country looks to carve a path out of its worst financial crisis.
The crisis-hit island nation, which is trying to secure a much-needed USD 2.9 billion bridge loan from the International Monetary Fund (IMF), has been trying to get financial assurances from its major creditors — China, Japan and India — which is the requisite for Colombo to get the bailout package.
The IMF bailout has been put on a halt as Sri Lanka pursues talks with creditors to meet the global lender’s condition for the facility.
Addressing trade unionists here on Saturday, President Wickremesinghe said his government has concluded debt restructuring talks with Japan and will hold such meetings with India this month.
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Wickremesinghe, who also holds the finance ministry portfolio, said that the debt restructuring talks with China’s Exim bank were held recently and further dialogue is in progress.
“On January 19, the Indian foreign minister is expected to visit and we will continue to have debt restructuring talks with India,” Wickremesinghe said.
Details of Jaishankar’s visit to Colombo have not been announced but he is expected to hold talks with the island nation’s top leadership.
Extending a much-needed lifeline to a neighbour in need, India gave financial assistance of nearly USD 4 billion to Colombo last year.
In January, India announced a USD 900 million loan to Sri Lanka to build up its depleted foreign reserves as the financial crisis began to unfold.
Later, it offered a USD 500 million credit line to Sri Lanka to fund the country’s fuel purchases. The credit line was later expanded to USD 700 million due to the sheer gravity of the situation.
The Indian credit lines since early 2022 have been in use to import essentials and fuel after street protests erupted due to severe shortages of essentials.
President Wickremesinghe stressed that the only option that the island nation was left with was a bailout package from the IMF.
The president said he was looking forward to the IMF facility in 3-4 tranches.
“I want to lift this country out of the plunge sooner,” he told the trade unionists.
Sri Lanka began debt restructuring talks with its creditors in September last year as warranted by its agreement with the IMF for the USD 2.9 billion facility over four years.
It began negotiating with the IMF for a bail-out after having announced its first-ever sovereign debt default in April last year.
The IMF facility would enable the island nation to obtain bridging finance from markets and other lending institutions such as the ADB and the World Bank.
“We would then recommence by the end of this year several projects that were stalled with Japan,” Wickremesinghe said.
He said there were no quick fixes to the current crisis and Sri Lanka had to be wary of sliding growth in Europe and the US which would have a direct bearing on the country’s exports.
The president’s meeting with trade unions assumes significance in view of hard economic reform measures to be implemented by the government.
Personal tax hikes and electricity tariff hikes proposed and the move to privatise state-owned enterprises are being already opposed by the trade unions.
The doctors’ trade union is set to observe a black week later this month to protest personal tax rises.
Trade union leaders, who took part in the meeting, said they emphasised the need to reach a collective understanding of the proposed reforms.
They said they had opposed the government’s plan to privatise state-owned enterprises.
Wickremesinghe recently said he was intent on selling the state-owned enterprises to boost reserves. The government has already made clear its plans to privatise Sri Lanka Telecom and Sri Lankan Airlines.
Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves, sparking political turmoil in the country which led to the ouster of the all-powerful Rajapaksa family.