new Delhi: Sri Lanka has sought an additional $1 billion credit line from India for imports of essential goods amid its worst economic crisis in decades.
On Monday, Reuters news agency quoted two sources as saying that External Affairs Minister S Jaishankar started talks with his neighbour’s government.
The island nation in the Indian Ocean is facing an economic crisis as it struggles to pay for essential imports of food and fuel following a 70 per cent drop in foreign exchange reserves since January 2020, leading to currency devaluation And an attempt was made to seek help from global lenders. ,
India has indicated that it will fulfill the request for the new line, which will be used to import essential commodities like rice, wheat flour, pulses, sugar and medicines, a source informed on the matter.
“Sri Lanka has requested an additional $1 billion credit line from India for imports of essential goods,” the source said, adding that “this would be on top of the $1 billion credit line already pledged by India. “
Both sources declined to be identified because the discussions were confidential.
Sri Lanka’s finance and foreign ministries as well as India’s foreign ministry did not immediately respond to requests seeking comment.
Sri Lanka’s Finance Minister Basil Rajapaksa signed a $1 billion line of credit to India this month to help pay for vital imports by Sri Lanka.
Since 2021, the economic situation in Sri Lanka has been deteriorating as the government has declared an economic emergency in the country. The sudden rise in the cost of food and shortage of fuel made many people queue up in front of grocery stores and petrol pumps.
News reports suggested that rising food costs, a sinking currency and dwindling foreign exchange reserves made matters worse for Sri Lankans. The current scenario in the island nation is worrying as the country is on the verge of bankruptcy. Prices of essential commodities, including milk and rice, are skyrocketing, petrol and diesel are not available and power stations are closed.