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Desperate Sri Lanka now seeks $100 million from AIIB, the China backed multilateral lender

AIIB considering extending a loan to bankrupt Sri Lanka

Debt-ridden Sri Lanka has initiated talks with the Asian Infrastructure Investment Bank (AIIB) for a $100 million emergency financial package. Colombo has sought foreign exchange liquidity assistance for its banks. Set up in 2014 and based in Beijing, AIIB is primarily backed by China.

“A loan amount extended by AIIB is not the same as a Chinese loan, as many are projecting. AIIB is a professionally run multilateral agency,” an analyst explained.

Sri Lanka is currently in the grip of an unprecedented economic crisis driven by acute shortages of food and fuel. The country’s usable foreign exchange reserves have dwindled to an alarming level. At present it is around just $50 million. Sri Lanka has also sought bilateral financial assistance from China.

In April Sri Lanka’s inflation rate touched 29.8 per cent.

On April 12, Sri Lanka announced defaulting on the entire $51 billion external debt repayment. This year alone the repayment amount was to the tune of $8 billion. Colombo is now in talks with the International Monetary Fund (IMF). However, securing IMF assistance would take time. “It will not happen immediately and that apart there are strict riders attached to the IMF loan,” the analyst said.

Sri Lanka has also reached out to countries for bilateral financial assistance. India, which has already provided financial assistance to the island nation. New has said it it remains committed to help Sri Lanka.

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State of emergency will not solve Sri Lanka’s difficulties, say heads of foreign missions in Colombo