China, Bangladesh, India To Help Sri Lanka Overcome Economic Crisis

India, China and Bangladesh have stepped in to help Sri Lanka in its economic crisis.

The three countries have come forward in a foreign exchange shortage that has forced Sri Lanka to devalue its currency amid soaring inflation, and to seek International Monetary Fund (IMF) assistance.

According to Daily Sabah, Sri Lanka's worst economic crisis in decades is as a result of mismanaged government finances and ill-timed tax cuts, alongside the impact of the COVID-19 pandemic.

With only $2.31 billion left in reserves, Sri Lanka has to repay the debt of about $4 billion over the rest of this year, including a $1 billion international sovereign bond that matures in July.

Last December, Sri Lanka's central bank received a $1.5 billion swap denominated in yuan, which was again used to top up reserves.

China is considering offering a $1.5 billion credit facility to Sri Lanka, besides a separate loan of up to $1 billion which the government has requested.

China is Sri Lanka's fourth-biggest lender, behind international financial markets, the Asian Development Bank (ADB) and Japan.

Also, the Reserve Bank of India in January announced a $400 million swap to help Sri Lanka shore up reserves, as part of an aid package negotiated.