India is willing to commit up to another $2 billion in financial assistance to Sri Lanka while also supporting the island nation with food and fuel, five sources told Reuters, as New Delhi tries to regain ground lost to China in recent years.

Sri Lanka, hit by its worst economic crisis since independence in 1948 and on the brink of its first debt default, has been asking friendly nations including India and China for credit lines, food and energy. The Asian giants have already committed billions of dollars in financial support.

"We are definitely looking to help them out and are willing to offer more swap lines and loans," said an Indian source aware of various discussions with Sri Lanka.

A senior government source in New Delhi said Sri Lanka's warning on Tuesday of defaulting on debt payments was a worry, but that "we can still give them up to $2 billion in swaps and support".

Another source familiar with Sri Lanka's thinking said it was seeking India's help to roll over some $2 billion in dues, such as those owed to the South Asia-focussed Asian Clearing Union. The source said the response had been positive from India.

All the sources had direct knowledge of the matter or had been briefed on it, but they declined to be named as the discussions were private.

India's government and its central bank, as well as Sri Lanka's foreign and finance ministries, did not immediately respond to requests for comment.

India has so far committed $1.9 billion to Sri Lanka in loans, credit lines and currency swaps. Sri Lanka has also sought another $500 million credit line for fuel.

China has extended a $1.3 billion syndicated loan and a $1.5 billion-yuan denominated swap, while negotiations are ongoing for more loans and credit lines.

One of the sources said New Delhi was keen for its southern neighbour to cut its reliance on China. Sri Lanka has an outstanding debt of about $3.5 billion with China - or 10.8% of the island's total - and Beijing has also built ports and roads in the country.

"We want them to reduce their debt levels from China and we want to become stronger partners," said the source.

CUTTING TIES
India has also sent ships with sugar, rice and wheat - items of which it has a surplus, unlike China - to Sri Lanka ahead of the country's Sinhala and Tamil New Year on Thursday.

Four of the sources said though New Delhi had not formally made cutting Sri Lanka's reliance on Beijing a condition for offering help, it had been able to make the Sri Lankans realise that it was in a better position to support them than China.

Sri Lanka is due to formally start loan negotiations with the International Monetary Fund on Monday, and one of the Indian sources said that would be critical in New Delhi agreeing to more aid for the country.

Sri Lanka's central bank said on Tuesday it had become "challenging and impossible" to repay external debt, as it tries to use its dwindling foreign exchange reserves to import essentials like fuel. Street protests have gone on for more than a month against shortages of fuel, food, power and medicine.

President Gotabaya Rajapaksa (L) with Prime Minister Mahinda File Picture

Sri Lankan protesters reject PM Mahinda Rajapaksa's offer for talks

Colombo: Sri Lankans protesting outside the President's Office in Colombo on Wednesday rejected Prime Minister Mahinda Rajapksa's offer for talks and demanded the resignation of President Gotabaya Rajapaksa and all members of his family from the government.

Social media posts from the participants said they were unwilling to have any talks unless the Rajapaksas quit from all positions in the government.

"We did not come here for talks. We are here to demand that you and the government resign, one youth activist at the protest site, which is now known by them as GotGoGama, was quoted as saying by News 1st channel.

The protests entered its fifth day on Wednesday and since it began on Saturday, it was carried out round-the-clock by youths demanding a total transformation of the "corrupt political culture", which they claim has been prevailing in the island nation since it gained Independence from Britain in 1948.

Several celebrities, musicians, artistes and writers joined the protests on Wednesday. Among them was Roshan Mahanama, the celebrity cricketer who was a member of the 1996 World Cup winning team.

"People are suffering without essentials and electricity. No solutions have come from politicians, this is why this action is taking place," Mahanama said.

Earlier, a statement from the Prime Minister's Office said that he was willing to hold discussions with the protesting youths who are camping at Galle Face esplanade located near President Gotabaya's secretariat. The prime minister has said if the protestors are ready for talks, he would extend an invitation for their representatives to meet for discussions, it noted.

Prime Minister Mahinda is the elder brother of President Gotabaya. Basil, the youngest, was holding the finance portfolio till he was sacked earlier this month by the president amidst the economic crisis. The eldest brother, Chamal, controls the agriculture ministry and nephew Namal is the sports minister.

The protest campaign has been running on social media, urging youths to gather at Galle Face. Besides, there have been continuing protests across the island, blaming the government for its mishandling of the forex crisis which led to severe shortages of essentials.

As protests raged in most parts of the island, large queues for fuel and cooking gas were witnessed. The people vent their anger against the government for the mishandling the economic crisis - the worst-ever in the country's history.

The public anger was more as they have been made to wait in queues hampering their plans to celebrate the traditional Sinhala and Tamil New Year which falls on Thursday. The government on Tuesday announced the default of the island's international debt payments, the first time ever in independent Sri Lanka.

President Gotabaya who got his ministers to resign as a response to public dissatisfaction failed to win support for his call on the Opposition parties to join a unity Cabinet. He is running the country with just four ministers.

The main Opposition, meanwhile, announced that its leader Sajith Premadasa has signed three motions which would soon be tabled in Parliament -- a motion of no trust, an impeachment motion against President Gotabaya and a motion to repeal 20 amendments which had given him absolute power as president in 2020.

Maithripala Sirisena, the former president and a member of the ruling partner Sri Lanka Podujana Peramuna (SLPP), told reporters Tuesday night that they would no longer attend political talks with the government.

They had proposed an 11-point plan, including the formation of an all-party interim government, to overcome the current political impasse.

Sri Lanka is facing its worst economic crisis since gaining independence from the UK in 1948. People have been protesting for weeks over lengthy power cuts and shortage of fuel, food and other daily essentials.

President Gotabaya has defended his government's actions, saying the foreign exchange crisis was not his making and the economic downturn was largely pandemic driven by the island nation's tourism revenue and inward remittances waning.

Saddled with a huge forex crisis, Sri Lanka on Tuesday suspended servicing external public debt pending the completion of its discussions with the International Monetary Fund (IMF) and the preparation of a comprehensive debt restructuring programme covering the obligations.

The policy shall be in effect for all international bonds, all bilateral loans excluding swaps between the Central Bank and a foreign central bank, all loans with commercial banks and institutional lenders, the Finance Ministry has said.

In a televised address to the nation on Monday, Prime Minister Mahinda, who is under growing pressure to quit, said he understands the people's sufferings.

"We have to strengthen the economy. We will take the responsibility to resolve the economic issue in the same way we ended the 30-year war," he had said, referring to his military victory over the Liberation Tigers of Tamil Eelam (LTTE) in 2009.

The LTTE, which led a separatist war for a separate Tamil homeland, was crushed by the Lankan military in 2009 with the death of its supremo Velupillai Prabhakaran.

Mahinda had said the government is working round-the-clock to overcome the economic crisis. He appealed to the protesters to end their anti-government agitation and said that every minute spent on streets deprives the country of dollar inflow.

PTI