Indian assistance not 'charitable donations': Sri Lankan PM Wickremesinghe

COLOMBO: Ranil Wickremesinghe Sri Lanka's Prime Minister spoke to the parliament about the monetary assistance given to it by India and said that it was not 'charitable donations'. He added that the island nation in the grips of the worst financial crisis must have a plan in place to repay these loans.

Sri Lanka is facing its worst economic crisis since independence in 1948, with severe shortages of food, medicine, cooking gas and fuel across the island.

"We have taken loans amounting to USD 4 billion under the Indian credit line. We have requested more loan assistance from our Indian counterparts. But even India will not be able to continuously support us in this manner. Even their assistance has its limits. On the other hand, we too must have a plan to repay these loans," Wickremesinghe said.

"These are not charitable donations," Wickremesinghe told Parliament in an update on the government's mitigation measures taken so far.

He said a team of top officials of the Reserve Bank of India (RBI) would arrive in Colombo on Thursday to assess the local financial situation. Wickremesinghe added that Sri Lanka was facing a very serious situation beyond the shortage of fuel, gas, electricity and food.

"Our economy has faced a complete collapse. That is the most serious issue before us today. These issues can only be resolved through the reviving of the Sri Lankan economy. In order to do this, we must first resolve the foreign reserves crisis faced by us," he said.

He said reviving a country with a completely shattered economy was not an easy task, particularly when they have dangerously low foreign reserves. "For Sri Lanka, the only safe option now is to hold discussions with the International Monetary Fund," he said.

"In fact, this is our only option. We must take this path. Our aim is to hold discussions with the IMF and arrive at an agreement to obtain an additional credit facility'' he added.

The country, which is almost bankrupt, announced in April that it would suspend about USD 7 billion in foreign debt repayments this year, out of the nearly USD 25 billion in arrears due by 2026, due to a severe foreign currency crisis.

Sri Lanka has a total foreign debt of USD 51 billion. Indian credit lines since January this year have been a lifeline for Sri Lanka amid growing public dissension over the deteriorating economic situation.

Wickremesinghe said, "a team of representatives from the US Department of the Treasury will also arrive in Sri Lanka. We intend to enter into an official level agreement with the IMF by the end of July."

A New York media report said that Hamilton Reserve Bank, a US bank has begun the process of filing an action against the Island nation for defaulting on a billion-dollar sovereign bond maturing next month.

The ruling Rajapaksa faction has been accused of committing massive corruption and orchestrating the default.

It is alleged that the Rajapaksa family amassed billions of dollars in assets and hid them in bank accounts in Dubai, Seychelles and St. Martin's.

With PTI inputs