Sri Lanka is seeking to mobilise more foreign financing from India, under a plan to secure funds by entering into agreements with foreign development partners and lending agencies, official sources said. The island nation has been hit hard by the COVID-19 pandemic pushing its progress in improving welfare backwards by more than five years, the [...]

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Sri Lanka to mobilise more foreign financing from India

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Sri Lanka is seeking to mobilise more foreign financing from India, under a plan to secure funds by entering into agreements with foreign development partners and lending agencies, official sources said.

The island nation has been hit hard by the COVID-19 pandemic pushing its progress in improving welfare backwards by more than five years, the sources said.

The performance of mobilising foreign financing during the first quarter was greatly affected by the COVID-19 pandemic; a senior Treasury official disclosed.

The country has been able to enter into agreements with countries like India and China and several lending agencies including the World Bank and the ADB, he said.

India has become one of the key development partners in offering financial assistance via bilateral currency swap arrangements and lines of credit entering into agreements during this period.

The US$400 million credit line offered by New Delhi will be used mainly for infrastructure projects, the official said adding that it will benefit Sri Lanka’s economy giving momentum to projects of mutual benefit.

Indian and Sri Lankan governments will sign the agreement soon towards this financial cooperation enabling the country to implement community – based development projects with higher benefits for the next five years from 2020-2025,

Cabinet co-spokesman Dr. Ramesh Pathirana said that the cabinet of ministers has given its approval to sign the agreement.

India has also offered lines of credit worth $100 million to Sri Lanka for three solar projects in the country and another sum of $50 million for the defence sector, according to an official statement.

“An additional request for a bilateral currency swap arrangement worth around $1.1 billion by the Sri Lankan side remains under discussion,” it said adding that this was in addition to a fresh credit line of $400 million for infrastructural and other development projects.

This financial aid will boost the country’s dwindling foreign exchange reserves and help overcome the economic slowdown due to the coronavirus pandemic.

The new request is in addition to the $400 million Sri Lanka has sought from the Indian government under the South Asian Association for Regional Cooperation (SAARC) framework.

Sri Lanka owes about $960 million to India and earlier this year India agreed to a $400 million currency swap facility for Sri Lanka until November 2022.

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