Source : INDIA TODAY NEWS
India played a decisive role in helping Sri Lanka through its worst economic crisis, with Finance Minister Nirmala Sitharaman personally pressing the International Monetary Fund (IMF) to urgently support the island nation, former Sri Lankan Finance Minister Ali Sabry has revealed. This reveals the way India helps its neighbours while some countries try the debt trap.
In a clip of a podcast in the Impact Stories, Sabry said the tone of a crucial IMF meeting changed after Sitharaman spoke to the Fund’s leadership on Sri Lanka’s behalf in Washington in April 2022.
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“When I went back to the meeting… the tone, the approach, the environment, everything had changed,” Sabry said, recalling how an initially “reluctant” IMF leadership became more receptive after meeting Sitharaman. Her intervention was part of a wider Indian effort that included credit facilities, a currency swap, deferred trade payments, humanitarian supplies and, later, support for Sri Lanka’s IMF bailout.
Sitharaman’s intervention came even as India positioned itself as a responsible and a dependable neighbour. India also provided nearly $4-billion in credit, payment support and essential supplies. From fuel and food to fertiliser and medicines, New Delhi’s assistance helped Colombo maintain critical imports as its foreign-exchange reserves ran dry.
Back in 2022, Sri Lanka faced its worst economic crisis. But the crisis was years in the making. It was driven by heavy debt, sweeping tax cuts, depleted foreign-exchange reserves, the collapse of tourism during Covid-19 and policy missteps, including a sudden ban on chemical fertilisers.
By early 2022, the country lacked dollars to import fuel, food and medicines, leading to power cuts, shortages, soaring prices and mass protests. It suspended foreign-debt payments in April. That’s when India, following its Neighbourhood First Policy, stepped in with emergency financing and supplies, while also pushing international institutions to support Colombo’s recovery, which Sabry revealed about in the clip.
Ali Sabry served as Sri Lanka’s Finance Minister from April 4 to May 9, 2022, in President Gotabaya Rajapaksa’s government after the Cabinet resigned en masse amid the economic crisis. He took charge at the height of the economic crisis and led the initial IMF negotiations. He had also served as the Justice Minister and later as the Foreign Minister. A lawyer by profession and President’s Counsel, Sabry entered Parliament as a national-list MP in 2020.
FORMER SRI LANKAN MINISTER SABRY RECALLS INDIA’S INTERVENTION AND IMF TURNAROUND
Sabry, who was tasked with negotiating with the IMF after taking charge of Sri Lanka’s finance ministry in April 2022, recalled facing a sceptical response during his initial discussions in Washington.
“When I went to Washington, I had a meeting with the regional directors, and they were very negative about Sri Lanka. They said, there are 16 times we have gone through this,” Sabry said in the clip posted by the Impact Stories handle.
“I was disappointed, you know, the first time we tried to say a different thing, not willing to listen. I thought they lacked empathy and all those things,” he added.
Sabry said he was scheduled to meet IMF Managing Director Kristalina Georgieva and then First Deputy Managing Director Gita Gopinath later that day. Before the meeting, he had lunch with Sitharaman and told her that his initial talks had not gone well.
“She asked me, Minister, how did the meeting go? I said, not that great. You know, they were kind of reluctant and there were a lot of issues and all those things,” Sabry recalled.
According to him, Sitharaman responded by saying, “Don’t worry, don’t worry. I will meet Kristalina at 2 o’clock before your meeting. I will put a word on that.”
When Sabry subsequently met the IMF leadership, he said, the atmosphere had changed dramatically. Georgieva told him that she had just met Sitharaman and that “about 70 to 80% of the time was consumed was not for India, but for Sri Lanka”.
“I think that became the foundation of Sri Lanka’s recovery,” Sabry said.
SITHARAMAN PRESSED THE IMF TO URGENTLY HELP CRISIS-HIT SRI LANKA
Sabry’s account of the changed atmosphere and the “70 to 80%” figure is his recollection and has not been independently confirmed by the IMF. However, an official Indian Finance Ministry statement from April 2022 confirms that Sitharaman met Georgieva to seek urgent help for Sri Lanka.
“The IMF MD particularly brought reference to the help India is providing to Sri Lanka during their difficult economic crisis. Smt Nirmala Sitharaman indicated that the IMF should support and urgently provide financial assistance to Sri Lanka,” a statement by the Finance Ministry from April 2022 said.
Georgieva assured Sitharaman that the IMF would continue actively engaging with Colombo. “The Managing Director assured the Finance Minister that the IMF would continue to actively engage with Sri Lanka,” the statement added.
A photograph of the meeting shared by the Finance Ministry also showed India’s Chief Economic Adviser V Anantha Nageswaran at the meeting.
Sitharaman also met Sabry on the sidelines of the IMF-World Bank Spring Meetings. “Union Finance Minister Smt Nirmala Sitharaman assured Sri Lanka that as a close friend and good neighbour, India will try to extend all possible cooperation and assistance to Sri Lanka,” the Finance Ministry said at the time.
INDIA’S NEARLY $4-BILLION LIFELINE TO SRI LANKA
India’s intervention went far beyond diplomatic support, like we saw in the case of the IMF. India extended a $500-million credit line for petroleum products in February 2022 and a $1-billion concessional facility in March for food, medicines, fuel and industrial raw materials.
The Reserve Bank of India provided the Central Bank of Sri Lanka with a $400-million currency swap. India also deferred approximately $2 billion in Sri Lankan payment liabilities under the Asian Clearing Union, easing immediate pressure on Colombo’s depleted reserves.
A separate $55-million credit line financed the procurement of urea, helping Sri Lanka address fertiliser shortages and falling agricultural production. The Tamil Nadu government additionally supplied humanitarian assistance worth around $16 million, comprising 40,000 tonnes of rice, 500 tonnes of milk powder and life-saving medicines.
India later became the first bilateral creditor to give the IMF written financing assurances supporting Sri Lanka’s debt restructuring. Those assurances helped clear the way for the IMF to approve a nearly $3-billion Extended Fund Facility in March 2023.
– Ends
SOURCE :- TIMES OF INDIA
