Sri Lanka Financial Crisis: President Rajapaksa Thanks India For Extending $500 Million Credit

With the recent support, India’s overall development assistance to Sri Lanka stands at close to USD 4 billion, the Indian High Commission said. PM Rajapaksa thanked India while the nation is struggling with a financial crisis.

PTI

Updated on: 4 February 2022 2:43 am

EXIM and Government of Sri Lanka signing a $500 million credit line deal

Sri Lankan Prime Minister Mahinda Rajapaksa underlined the "strong bond of friendship" of his country with India, on Thursday. He expressed his gratitude to the Indian government for extending a USD 500 million credit line to Colombo to fund its fuel purchases while the island nation struggles to overcome its worst financial and energy crisis in decades.

He announced a deal between the Export Import Bank (EXIM) of India and the Government of Sri Lanka (GOSL) on Twitter. On Wednesday, both the parties signed a USD 500 million Line of Credit (LOC) agreement for purchase of petroleum products in the presence of the Lankan Finance Minister Basil Rajapaksa and the High Commissioner of India to Sri Lanka, Gopal Baglay. He tweeted,

The @IndiaEximBank and the #GoSL signed a USD 500 million line of credit agreement for purchase of petroleum products last afternoon. #lka is grateful to PM @narendramodi, the Govt of India and for the strong bond of friendship shared between our two nations. pic.twitter.com/hviUYFB1sG
— Mahinda Rajapaksa (@PresRajapaksa) February 3, 2022

India's support for fuel imports by Sri Lanka from India was in response to the urgent requirement and this critical support comes in the wake of a virtual meeting between the External Affairs Minister S Jaishankar and Finance Minister Basil Rajapaksa on January 15, the Indian High Commission here said on Wednesday.

With the recent support, India’s overall development assistance to Sri Lanka stands at close to USD 4 billion, the Indian High Commission said.

The credit line, which was under negotiations since August 2021, would ease pressure on the country's dwindling reserves that had dipped to USD 3.1 billion by December 2021, according to the Central Bank’s estimates.

Last week, India had also granted Sri Lanka a USD 400 million swap arrangement to boost its reserves.

Sri Lanka in recent weeks has been mulling different options to facilitate measures to prevent fuel pumps from going dry as the island nation faced an acute foreign exchange crisis.

The country is grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports. Additionally, power cuts are imposed at peak hours as the state power entity is unable to obtain fuel to run turbines. The state fuel entity has stopped oil supplies as the electricity board has large unpaid bills.

Last month, the Indian government had announced a billion-dollar assistance package in addition to other balance of payment support to its neighbour.