Exim Bank of India considers more lending to Sri Lanka amid diplomatic standoff with China

ECONOMYNEXT – India’s Exim (export and import) bank has discussed possible future infrastructure projects with Sri Lanka after funneling more than US $ 440 million into water supply projects in the country.

India, as a regional power, seeks to increase its influence over Sri Lanka amid a deepening debt crisis in the island nation and a diplomatic standoff with easy loan provider China .

The visit last week by a team of three members of the Exim Bank of India came days after India pledged a US $ 400million swap, a US $ 1 billion import loan US dollars for food, medicine and essentials, and US $ 500 million in fuel credit during Finance Minister Basil Rajapaksa’s visit to New Delhi.

“[Exim bank officials and Sri Lanka] also discussed projects that could be undertaken under the BC-NEIA program in the future, ”the Indian High Commission in Sri Lanka said in a statement referring to the buyer’s credit facilities under the account. National Export Insurance (BC-NEIA), a non-recourse system facilitated by Exim Bank lending.

The bank loaned US $ 441.42 million to Sri Lanka’s National Water Supply and Drainage Board (NWSDB) to finance four water supply projects.

India has become increasingly engaged with Sri Lanka since the middle of this year despite the unilateral cancellation by Prime Minister Mahinda Rajapaksa of a US $ 500 million deal with the Eastern Container Terminal (ECT ) in the port of Colombo in February.

However, high-level visits from Indian Foreign Minister Shri Harsh Vardhan Shringla, top investor and billionaire Gautam Adani, chairman of the Adani Group who was chosen to develop the West Container Terminal (WCT), and senior military officials have eased the diplomatic quarrel between the two countries.

India has also pledged to invest in the Trincomalee Oil Reservoir Farm, of which Sri Lanka has 99 large oil storage reservoirs, but which can be developed at India’s request due to a 2003 rental agreement.

The visit by Exim Bank officials also came at a time when Sri Lanka’s ties with its deep-pocketed lender China are strained over a shipment of contaminated organic fertilizers and reluctance. of the Sri Lankan government to authorize a selected Chinese company through an appropriate tender process for renewable energy. projects in three northern islands, 50 km from southern India.

China recently said it was on hold from northern energy projects due to security concerns raised by a “third party.”

China has become Sri Lanka’s biggest lender since the end of the 26 Years War. Beijing also aided Colombo with weapons in the final stages of the war in which India initially aided Tamil Tigers separatists with military training in the mid-1980s.

Analysts say India is trying to gain the confidence of the Sri Lankan government and people to oust China and liberate Sri Lanka from Chinese influence, but at the expense of Sri Lanka which is becoming increasingly dependent on it. ‘India for everything.

Indian aid, however, comes at a time when Sri Lanka faces the worst economic crisis in its history, a risk of default on its sovereign debt and a currency shortage threatening the country’s imports, especially essential foods and medicines.

Sri Lanka’s official reserves have fallen to $ 1.6 billion, their lowest in more than a decade, and the $ 81 billion economy is due to repay $ 500 million in international sovereign bonds in mid-January . (Colombo / Dec14 / 2021)

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