Sri Lankan Prime Minister Ranil Wickremesinghe told parliament on June 22 that India’s financial aids are not “charity donations” and that the island facing a severe economic crisis must have a plan to repay these loans. .
Also read: Explanation of the economic crisis in Sri Lanka
Sri Lanka is facing its worst economic crisis since independence in 1948, which has led to an acute shortage of essential items such as food, medicine, cooking gas and fuel throughout the island.
“We have borrowed in the amount of $4 billion under the Indian line of credit. We have applied for more loan assistance from our Indian counterparts. But even India will not be able to support us in this way continuously. Even their help has its limits. On the other hand, we must also have a plan to repay these loans. These are not charitable donations,” Mr Wickremesinghe told parliament in an update on the government’s mitigation measures taken so far.
He announced that a team of senior officials from the Reserve Bank of India (RBI) will arrive in Colombo on June 23 to assess local economic conditions.
Mr Wickremesinghe said Sri Lanka is now facing a much more serious situation than just the shortages of fuel, gas, electricity and food.
“Our economy has completely collapsed. That is the most serious issue before us today. These problems can only be solved by revitalizing Sri Lanka’s economy. To do this, we must first solve the foreign exchange crisis that we are facing,” he said. He said it is no easy task to revive a country with “a completely collapsed economy, especially one that is dangerously has few foreign reserves”.
For Sri Lanka, the only safe option now is to hold talks with the International Monetary Fund, he said. “In fact, this is our only option. We must go down this road. Our aim is to enter into discussions with the IMF and reach an agreement on obtaining an additional credit facility.”
The near-bankrupt country, with an acute currency crisis that resulted in foreign debt default, announced in April that it was suspending nearly $7 billion in foreign debt service for this year, of the roughly $25 billion owed through 2026. debt is $51 billion.
India’s credit lines since January this year have provided Sri Lanka with a lifeline amid growing public disagreement over deteriorating economic conditions.
Mr Wickremesinghe said a team of representatives from the US Treasury Department will also arrive in Sri Lanka next Monday. “We plan to finalize an official level agreement with the IMF by the end of July.” As Mr Wickremesinghe gave his statement, a media report from New York said Hamilton Reserve Bank, a US bank, has filed suit against Sri Lanka for defaulting on a billion dollar government bond due to expire next month.
It alleged that the ruling Rajapaksa clan orchestrated the default, which has been accused of large-scale corruption.
It alleged that the Rajapaksa family had amassed a multi-billion dollar fortune and hid it in bank accounts in Dubai, Seychelles and St.Martin.