Sri Lankan Finance Minister Basil Rajapaksha will meet with his Indian counterpart Nirmala Sitharaman this week to discuss a USD 1 billion loan that the Indian government has agreed to offer, as well as a road map for how the funds will be used.
According to Policy Research Group, India has previously provided a USD 500 million loan for fuel purchases and a USD 400 million currency swap through the South Asian Association for Regional Cooperation (SAARC) facility.
On Wednesday, the Sri Lankan Finance Minister met with Prime Minister Narendra Modi and Foreign Minister S Jaishankar and expressed gratitude to PM Modi for India's support for the Sri Lankan economy.
India has stepped in to help the island nation overcome serious financial limitations imposed by external debt payments and a dearth of US dollars in the country for commerce.
Sri Lanka is moving away from China and closer to India as a result of Colombo's failure to repay Chinese loans totaling USD 4.5 billion, prompting fears of a "debt trap."
Sri Lanka's foreign minister has been pleading with China and other nations to assist the country in its financial problems.
According to the research tank, Sri Lanka has also stated that whoever helps, Sri Lanka will partner on supplying vital supplies and providing business prospects on their island.
Fitch Ratings and Moody's Investors Service have lowered Sri Lanka's credit rating due to delays in securing additional cash required to meet loan commitments. The country is about to default on its debt.
When the Saudi Arabian foreign minister visited Colombo recently, he was asked to invest in the Port City and Hambantota Port projects. Oman was also requested to help with their fuel prices.
Sri Lanka's financial crisis began in 2019 with the Easter Sunday attacks, and the situation worsened as tourism fell and the government handed investors a 25% tax relief.
In January of this year, Jaishankar held a virtual meeting with Sri Lanka's Finance Minister, Basil Rajapaksa, in which he stated that India has always stood by Sri Lanka and will continue to do so in any way possible to help the country overcome the economic and other challenges posed by the COVID-19 pandemic.