India sent financing assurances to the International Monetary Fund (IMF) on Monday, becoming the first of Sri Lanka’s creditors to officially back the crisis-hit island nation’s debt restructuring programme.
The development comes days ahead of External Affairs Minister S. Jaishankar’s scheduled visit to Colombo on January 19 and 20, and just as Sri Lankan leaders concluded talks with a visiting high-level delegation of the Communist Party of China.
“The written financing assurances from India were sent to the IMF Monday evening,” a top official source in Colombo confirmed to The Hindu. This takes Sri Lanka one step closer to getting a crucial $2.9-billion package from the IMF, made contingent on “receiving financing assurances from Sri Lanka’s official creditors and making a good faith effort to reach a collaborative agreement with private creditors.”
China, Japan, and India are Sri Lanka’s three largest bilateral lenders. With India getting on board, Sri Lanka’s chances of swiftly tapping IMF assistance now depend on similar assurances from Japan and China. Sources familiar with Sri Lanka’s ongoing negotiations with creditors said that the Paris Club, of which Japan is a member, is likely to send its financing assurances “soon”.
China blamed for delay
Following the staff-level agreement with the IMF in September 2022, the Ranil Wickremesinghe government said that it would obtain IMF support before the end of the year. However, as Sri Lanka’s negotiations with creditors dragged on, Chinese loans came under the spotlight, drawing criticism from both local politicians and international actors. In a parliamentary intervention, a prominent opposition legislator squarely blamed China for the delay.
More recently, the U.S. Ambassador to Colombo, in a media interview, asked China not to be the “spoiler” in Sri Lanka’s debt restructuring process. The Chinese Embassy responded sharply on Tuesday, accusing the U.S. official of “hypocrisy” in a statement that pointed to private creditors from western countries, who hold about 40% of Sri Lanka’s debt.
Meanwhile, President Wickremesinghe on Tuesday told Parliament that ongoing discussions for economic recovery were “successful”.
“Currently, we are working to get our economy on the right track. Now we have to get India and China to consent to this debt restructuring. We are continuing discussions in that regard, and I am pleased to announce to this House that the discussions are currently successful,” he told the House.