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India, Sri Lanka inch closer to a financial deal as Chinese Foreign Minister Wang Yi plans a visit

Sri Lankan President Gotabaya Rakapaksa (Photo: IANS)

India is likely to extend a financial deal to Sri Lanka to help it tide over its foreign exchange woes even as it pursues the island nation to jointly develop the Trincomalee oil tank farm.

The island nation has fast-tracked the oil tank farm project over the past few weeks which has been in the waiting for decades owing to various hurdles like the LTTE insurgency and opposition by the nation's trade unions. India and Sri Lanka have been discussing the modalities of the project for over a year.

Sri Lankan Finance Minister Basil Rajapaksa had visited India early December to seek financial help for his country which is going through a bad patch with rising food prices, falling rupee, shortage of fuel and foreign exchange reserves at a low of $1.6 billion in November–just enough for a month's imports.

India had reportedly assured him of help with a four-pronged package, consisting of a line of credit, an energy security deal, offer of currency swap and Indian investments that would recharge and help grow the Sri Lankan economy.

India's financial assistance is likely to be in the form of a $400 million currency swap to help Sri Lanka address balance of payment issues, a $1 billion line of credit for importing essential items like food and medicine from India and a $500 million line of credit to import fuel from India, reports Sri Lanka's The Sunday Island

Basil Rajapaksa is the youngest of the trinity at the helm of affairs in Colombo with brothers Gotabaya Rajapaksa and Mahinda Rajapaksa as the President and Prime Minister respectively. He plans to visit India once again to attend the Vibrant Gujarat Summit from 10-12 January 2022. He is likely to meet Prime Minister Narendra Modi, reports Sri Lankan website News First.

The Indian Ocean island nation has taken unprecedented measures to control its financial crisis.

The India-Sri Lanka bonhomie has seen underlying tensions with China's deep economic tentacles in Colombo casting suspicion in New Delhi.

Colombo's rosy relations with Beijing too have seen choppy waters, with Chinese fertiliser firm Qingdao Seawin Biotech hauling up Sri Lanka for arbitration in Singapore over a rejected fertiliser deal. The Chinese embassy in Colombo joined the spat between the firm and Sri Lanka's agriculture and fertiliser departments, adding to diplomatic tension between the two allies.

Foreign Ministry spokesman Zhao Lijian told media persons in Beijing on Thursday that Foreign Minister Wang Yi plans to visit Sri Lanka in January. His visit will mark the 65th anniversary of China-Sri Lanka diplomatic relations.

Wang is likely to come up with investment proposals to shore up the crumbling economy, including financing for the $1.4 billion Colombo Port City project. Wang is also likely to mend the tear in bilateral relations that have soured over the fertiliser deal.