SRI LANKA has been given financial assurance by the Indian government to pave the way for an International Monetary Fund bailout plan.

India’s Foreign Minister Subrahmanyam Jaishankar announced the support on Friday while on a two-day visit to Sri Lanka, where he met with President Ranil Wickremesinghe and other Cabinet ministers.

Mr Jaishankar said: “We felt strongly that Sri Lanka’s creditors must take proactive steps to facilitate its recovery. India decided not to wait on others but to do what we believe is right. We extended financing assurances to the IMF to clear the way for Sri Lanka to move forward.”

He said: “Our expectation is that this will not only strengthen Sri Lanka’s position but ensure that all bilateral creditors are dealt with equally.”

Mr Jaishankar did not elaborate on the kind of assurances given.

Sri Lanka has a total foreign debt of $51 billion (£41.1bn) and it must pay back $28bn (£22.6bn) by 2027. 

But the island nation announced it was suspending repayment of $7bn (£5.6bn) that was due last year amid a serious foreign currency shortage.

India’s official credit to Sri Lanka is $4.4bn (£3.5bn) excluding other forms of lending. Among Sri Lanka’s leading creditors are Japan and China.

Sri Lanka and the IMF have reached a preliminary agreement on a $2.9bn (£2.3bn) bailout plan over four years, but final approval depends on assurances given by creditors on the debt restructuring.

The currency crisis and resultant shortages of food, medicine, fuel and cooking gas sparked riots last year, forcing the president to flee the country and later resign.

Sri Lanka announced this month it is cutting 6 per cent from budgets for each ministry this year and plans to cut the size of the military by nearly half from its current 200,000 by 2030.