India on Friday agreed to double its high-impact community development project in Sri Lanka with a new bilateral agreement signed during the much-anticipated visit of External Affairs Minister S Jaishankar.
Jaishankar, who is on a two-day visit to the debt-trapped island nation, met top leaders to enhance bilateral ties and finalise a debt restructuring plan to help Colombo carve out a path from its economic crisis.
"This agreement related to community development projects in Sri Lanka with the support of the government of India was signed in May 2005. Its project limit was rupees 300 million which will now be doubled to rupees 600 million by the agreement signed today," a statement from President Ranil Wickremesinghe’s office said.
Jaishankar also handed over 300 completed houses in the Galle, Kandy, and Nuwara Eliya districts in the housing project implemented by India.
Wickremesinghe’s office said that during the talks special attention was paid to “the debt restructuring programme of Sri Lanka which received a positive response from the Indian government”.
Jaishankar was quoted as saying that India had a good understanding of the situation Sri Lanka currently faced and that the Indian government would provide all possible support to solve the current economic issues, leading to the country's first-ever sovereign default in April last year.
The visit by Jaishankar was much looked forward to by the government here after India had issued the necessary financing assurances requested by the International Monetary Fund (IMF) so that the island nation could unlock the USD 2.9 billion bailout facility.
Commenting on the Indian decision to back Sri Lanka, state minister Shehan Semasinghe said negotiations would now commence with the Indian side following the issuance of assurance to IMF.
After the US appreciation of India on Thursday over New Delhi's backing of Sri Lanka in debt restructuring, the Australian government in a statement said: “Great news that India had confirmed its commitment to provide Sri Lanka with debt relief consistent with restoring debt sustainability under the IMF supported programme."
Sri Lanka was hit by an unprecedented financial crisis in 2022 due to a severe paucity of foreign exchange reserves, sparking political turmoil in the country which led to the ouster of the all-powerful Rajapaksa family, which has dominated Sri Lankan politics for over two decades.
India has extended about USD 4 billion in terms of credits and rollovers to help Sri Lanka get through an economic crisis.
Sri Lanka, which is trying to secure a USD 2.9 billion bridge loan from the IMF, was negotiating to get financial assurances from its major creditors - China, Japan, and India - which is the requisite for Colombo to get the bailout package.
The IMF bailout has been put on a halt as Sri Lanka pursues talks with creditors to meet the global lender’s condition for the facility.