COLOMBO/NEW DELHI: “A friend in need is a friend indeed” is the saying as it goes. The dictum is in full play as India has offered Sri Lanka an additional $500 million to help it to import fuel while it is in an advanced stage of discussion with the International Monetary Fund (IMF) for a bailout package.

Sri Lanka, which is grappling with one of the worst-ever foreign exchange crises and shortage of essential commodities, was extremely disappointed when China declined to come forward in support of the country on flimsy grounds. The fresh $500 million additional support by India to Colombo is over and above $1.5 billion of credit line offered by India earlier. The economic situation in Sri Lanka is dire and it has requested both India and China for support in these difficult times. India responded with an additional $500 million for the time being as against Colombo’s request for $1 billion, but China cited difficulties in supporting the country.

The RMB 200 million ($31 million) of Chinese humanitarian assistance to Colombo is a diplomatic way of denial rather than genuine support. Sri Lanka had asked $1 billion loan and $1.5 billion buyer’s credit from China and the so-called “humanitarian assistance” is of no avail for a country which is facing difficulties in importing even essential commodities. Sri Lanka needs at least $4 billion to meet its immediate debt service and import requirements.

Ali Sabry, the new Finance Minister of Sri Lanka is presently holding talks with international institutions including the IMF, the World Bank, China and Japan. He expressed hope that if the efforts are successful and an investment of $ 2 billion comes to the Central Bank, it will help stop the depreciation of SLR and stabilise it. After April’s announcement by Colombo about the imminent default of $ 35.5 billion in foreign debt due to disruptions caused by Covid-19 pandemic and Ukraine war, it started pro-active deliberations with the IMF for a bailout package.

The IMF management met a Sri Lankan delegation led by Finance Minister Ali Sabry and Central Bank of Sri Lanka Governor Nandalal Weerasinghe in Washington DC. The Sri Lankan delegation discussed policy actions to address economic challenges.