The Indian government has granted
Sri Lanka an extension on $2.6 billion in debt owed to the Reserve Bank of
India (RBI). The relief includes a $2.2 billion currency swap arrangement and a
$400 million Special Swap Arrangement under the South Asian Association for
Regional Cooperation (SAARC) and the Asian Clearing Union (ACU) mechanisms.
Sri Lanka was set to repay over $1.7 billion this week, but India’s proactive move aims to support the island nation’s fragile economic recovery and ongoing discussions under the International Monetary Fund (IMF) program.
Diplomatic Action Without Formal Request
A diplomatic source revealed that the extension was granted without a direct request from the Sri Lankan government, with India acting through diplomatic channels. Formal confirmation of the extension's duration is expected soon from New Delhi.
Background on the Debt
Sri Lanka’s debt to India under the ACU and SAARC mechanisms was restructured into a $2.2 billion swap, supplemented by a $400 million SAARC Special Swap Arrangement. The total debt, scheduled for repayment between 2023 and 2026, has been a significant component of Sri Lanka’s external obligations.
Earlier in 2024, Sri Lanka repaid $400 million and an additional $200 million towards ACU obligations. The new extension offers critical temporary relief as the nation continues its economic recovery under the IMF-backed program.
Strengthening Bilateral Ties
This financial extension underscores the strong bilateral relationship between India and Sri Lanka. India’s continued support reflects its commitment to regional stability and economic cooperation, reaffirming its role as a key partner in Sri Lanka’s recovery efforts.
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