Sri Lanka, hit by its worst economic crisis since independence in 1948 and on the verge of its first bankruptcy, is asking friendly nations, including India and China, for credit limits, food and energy. Asian giants have already pledged billions of dollars in financial support. “We are definitely looking to help them and we are willing to offer more exchange lines and loans,” said an Indian source familiar with the various talks with Sri Lanka. Sign up now for FREE unlimited access to Reuters.com Register A senior government source in New Delhi said Sri Lanka’s warning on Tuesday of default had been worrying, but that “we can still give them up to $ 2 billion in exchanges and support”. read more Another source familiar with the Sri Lankan way of thinking said it was asking for India’s help to raise the fees of about $ 2 billion, such as those owed to the Asian Liberation Union, which focuses on South Asia. The source said the response was positive from India. All sources had immediate knowledge of the matter or were informed of it, but declined to be named as the discussions were private. The Government of India and its central bank, as well as the Sri Lankan Ministries of Foreign Affairs and Finance, did not immediately respond to requests for comment. India has so far committed $ 1.9 billion to Sri Lanka in loans, credit lines and currency exchanges. Sri Lanka has also sought another $ 500 million fuel line. China has expanded a $ 1.3 billion syndicated loan and a $ 1.5 billion yuan swap, and talks are under way on more loans and credit lines. read more One source said New Delhi wanted its southern neighbor to cut its dependence on China. Sri Lanka owes about $ 3.5 billion to China – or 10.8% of the island as a whole – and Beijing has also built ports and roads in the country. read more “We want to reduce their debt levels from China and we want to become stronger partners,” the source said. Repeated lending cycles from the capital markets, including international government bonds, have made them the largest source of foreign financing for Sri Lanka. TIE CUTTING India also sent ships of sugar, rice and wheat – of which there is a surplus, unlike China – to Sri Lanka in the run-up to the New Year of Sinhala and Tamil on Thursday. Four of the sources said that although New Delhi had not formally made it a condition of helping to reduce Sri Lanka’s dependence on Beijing, it was able to make Sri Lankans realize that it was in a better position to help them. supported by China. Sri Lanka is set to formally begin loan negotiations with the International Monetary Fund on Monday, and an Indian source said it would be crucial for New Delhi to agree on more aid to the country. Sri Lanka’s central bank said on Tuesday it was “challenging and impossible” to repay its foreign debt as it tried to use its declining foreign exchange reserves to import basic commodities such as fuel. Protests in the streets have been going on for more than a month against shortages of fuel, food, electricity and medicine. read more Sign up now for FREE unlimited access to Reuters.com Register Report by Swati Bhat, Aftab Ahmed, Rajendra Jadhav and Devjyot Ghoshal. Edited by Kirsten Donovan Our role models: The Thomson Reuters Trust Principles.
