Wednesday, Nov 30, 2022

India Extended Economic Assistance Of Over $3 Billion To Debt-Ridden Sri Lanka In 2022

On Monday, India had extended its current credit line by a further $200 million to replenish Sri Lanka’s rapidly depleting fuel stocks.  

Sri Lanka economic crisis AP Photo/Eranga Jayawardena

India has committed more than $3 billion to debt-ridden Sri Lanka in loans, credit lines and credit swaps since January this year, the Indian High Commission in Colombo said on Tuesday, as the island nation tries to navigate through its worst economic crisis since independence.  

On Monday, India had extended its current credit line by a further $200 million to replenish Sri Lanka’s rapidly depleting fuel stocks.  

The ongoing crisis in Sri Lanka is caused in part by a lack of foreign currency, which has meant that the country cannot afford to pay for imports of staple foods and fuel, leading to acute shortages and very high prices.  

“The $1 billion credit facility for the purchase of food, medicines, and other essential commodities is already operational,” a statement from the Indian High Commission said, adding that around 16,000 metric tonnes of rice supplied by India is also being distributed.  

Additional consignments of rice, medicines and industrial raw materials and other essentials are envisaged under the credit line, the statement added.

“A separate Line of Credit of $500 million for the purchase of petroleum products, such as diesel, petrol and aviation fuel has paved the way for the delivery of 9 consignments of different types of fuel,” it said.  

In April this year, ahead of the Sinhala and Tamil new year, India had sent an additional 11,000 MT of rice as a goodwill gesture.

In February, New Delhi had granted $500 billion as short-term loan to Sri Lanka to procure fuel stocks.  

“Close to 400,000 MT of fuel have been delivered till date and more consignments will arrive soon,” the statement added.  

Last month, India had responded to a Sri Lankan hospital’s call for urgent medical supplies by delivering a large consignment of important drugs with the help of an Indian Navy ship.  

Overall economic assistance which stands a shade above $3 billion in 2022 alone has been of various kinds – $1 billion credit line for essentials; $500 million credit line for purchase of petroleum products; USD 400 million bilateral currency swap; and over $1 billion under the Asian Clearing Union Framework. 

The Sri Lankan government said it would temporarily default on $35.5 billion in foreign debt as the pandemic and the war in Ukraine made it impossible to make payments to overseas creditors.

The Gotabaya Rajapaksa regime has also asked for an International Monetary Fund bailout, which could take up to three months to arrive.  

According to the data published by the government’s Census and Statistics Office, the overall inflation hit 29.8 per cent in April from 18.7 per cent recorded in March.

The food inflation increased from 30.21 per cent in March to 46.6 per cent in April. 

Most food items have recorded price increases. 

Months of lengthy blackouts and acute shortages of food, fuel, and pharmaceuticals have triggered widespread protests clamoring for the government's resignation.