India Extends $900 Million Aid To Help Sri Lanka Tide Over Its Economic Crisis

The $900 million financial assistance comes in the form of $400 million currency swap and deferment of over $500 million due for settlement to the Asian Clearing Union.

Indian High Commissioner to Sri Lanka Gopal Baglay (left) and Central Bank Of Sri Lanka Governor Ajith Nivard Cabraal met in Colombo on January 13, 2022 | Photo: Twitter/@IndiainSL

New Delhi: India has extended a US $900 million assistance to neighbour Sri Lanka that is reeling under a severe economic crisis. 

The $900 million aid comes in the form of a $400 million currency swap and deferment of over $500 million due for settlement to the Asian Clearing Union (ACU).

Indian High Commissioner to Sri Lanka Gopal Baglay and Sri Lanka's central bank Governor Ajith Nivard Cabraal met in this regard on Thursday.

In a tweet, the Indian High Commission in Sri Lanka said India expressed “strong support” to SriLanka in the wake of the Reserve Bank of India (RBI) extending over $900 million facilities over the last week. “These comprise deferment of Asian Clearing Union settlement of over USD 500 mn and currency swap of USD 400 mn,” the mission posted.

The high commissioner said these steps were “in line with Flag of India’s strong commitment to stand with Flag of Sri Lanka for economic recovery and growth”. 

High Commissioner met Gov @CBSL and expressed #India’s strong support to #SriLanka in the wake of @RBI extending over USD 900 mn facilities over the last week.These comprise deferment of Asian Clearing Union settlement of over USD 500 mn and currency swap of USD 400 mn (1/2) pic.twitter.com/6PgZtuDAcx

— India in Sri Lanka (@IndiainSL) January 13, 2022

Cabraal also took to Twitter to confirm and acknowledge the currency swap and other assistance. 

“Had an excellent discussion with Indian High Commissioner to #SriLanka HE Gopal Baglay at my office this morning where he confirmed the #SAARC #SWAP by RBI and other forms of bilateral cooperation,” he posted.

Had an excellent discussion with Indian High Commissioner to #SriLanka HE Gopal Baglay at my office this morning where he confirmed the #SAARC #SWAP by RBI and other forms of bilateral cooperation. @IndiainSL @CBSL #SriLanka #India #Gopal_Baglay pic.twitter.com/i7CDGVP60n

— Ajith Nivard Cabraal (@an_cabraal) January 13, 2022

In July 2020, the RBI had extended a similar swap of $400 million to Sri Lanka when it was reeling under the first first wave of the Covid pandemic. 

The island nation is under a severe foreign reserve crunch and there are fears it may default on debt repayment. Sri Lanka has over $7 billion outstanding debt this year, starting with $500 million International sovereign bonds maturing on January 18.

The central bank has said the country is confident that it will be able to pay off all the debts. 

India’s latest aid comes a week after it signed an agreement with Sri Lanka on jointly developing the Trincomalee oil tank farm along the north-eastern coast.