India Extends Its Current Credit Line to Sri Lanka by USD 200 Mn to Procure Fuel: Power Minister

India has extended its current credit line by a further USD 200 million to replenish Sri Lanka’s rapidly depleting fuel stocks, Power and Energy Minister Kanchana Wijesekera said on Monday. Sri Lanka is currently in the throes of an unprecedented economic turmoil since its independence from Britain in 1948. The crisis 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. India has already given an additional USD 200 million which will be used for another 4 shipments (in May). Apart from this we are also in discussion with India for another USD 500 million credit line, but this is not finalized yet, Wijesekara told reporters.

Sri Lanka has utilized USD 400 million from the USD 500 million credit line extended by India in March and April, and the two fuel shipments will be paid for from the remaining funds this month, the minister said. India has already agreed to defer USD 1.5 billion in import payments that Sri Lanka needs to make to the Asian Clearing Union. Last month, New Delhi also extended the tenure of a USD 400 million swap given in January this year, the Indian High Commission said. The Sri Lankan government said it would temporarily default on USD 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.

Wijesekara said the monthly fuel import cost in May is estimated to be around USD 580 million, compared to USD 200 million three months ago, due to the spike in the global oil prices. The fuel imports from India notwithstanding, Sri Lanka will also need to address the shortfall of dollars to pay for its crude oil shipments.

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

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