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India plans to stop giving money to Sri Lanka as talks with the IMF move forward - sources

Image: Reuters Berita 24 English -  Two sources told Reuters that India does not plan to give Sri Lanka any more financial help on top of t...

Image: Reuters

Berita 24 English -  Two sources told Reuters that India does not plan to give Sri Lanka any more financial help on top of the nearly $4 billion it has already given this year. This is because the island's economy is starting to get back on track after a preliminary loan agreement with the IMF.

This year, India has given the most help to its neighbour to the south, which is going through its worst economic crisis in more than 70 years and is having trouble paying for imports, though the situation is better now than it was from May to July.

"We have already helped them out to the tune of $3.8 billion. Now, everything depends on the IMF, "Reuters heard from a person in the Indian government who knew what was being said in talks with Sri Lanka. "No more help can be given by other countries."

A source in the Sri Lankan government said that India's decision didn't come as a surprise and that New Delhi had told them a few months ago that they wouldn't be getting much more large-scale help.

The source, on the other hand, said that India would be invited to a donor conference that Sri Lanka planned to hold later this year with Japan, China, and possibly South Korea.

Another government official in Sri Lanka said that talks between India and Sri Lanka about a $1 billion swap arrangement and Sri Lanka's May request for a second $500 million credit line to buy fuel had not gone very well.

The sources didn't want to be named because they weren't allowed to talk to the press.

When asked for comments, India's Finance Ministry, Sri Lanka's Finance Ministry, and Sri Lanka's Central Bank did not respond right away.

Early in September, Sri Lanka and the IMF came to a preliminary agreement for a loan of about $2.9 billion. This loan is dependent on the country getting financing guarantees from official creditors and negotiating with private creditors.

One of the Sri Lankan sources said, "Our main goal is to move forward with the IMF programme and get ourselves out of this mess on our own."

The other Sri Lankan source said that Sri Lanka has tried to use its limited foreign exchange reserves to buy fuel and redirected money from multilateral agencies to buy other important things like fertiliser, cooking gas, and medicine.

The 22 million people in this country have been dealing with shortages of fuel, food, and medicine for months. This is because the country's foreign exchange reserves fell to record lows, which stopped imports and caused unprecedented public unrest.

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