Sri Lanka seeks additional $1 billion from India: report | Business and Economics News
A new line of credit will be used to pay for imports of essential items such as rice, wheat flour, pulses, sugar and medicines.
Sri Lanka has requested an additional $1 billion line of credit from India to import essential goods amid its worst economic crisis in decades, Reuters reported, citing two sources, as India’s business minister foreign countries began talks with the government of its neighbour.
The island nation is struggling to pay for essential food and fuel imports after a 70% drop in foreign exchange reserves since January 2020 led to a devaluation of the currency and efforts to seek help from lenders global.
New Delhi has said it will meet demand for the new line, which will be used to import essentials such as rice, wheat flour, pulses, sugar and medicines, one of the sources said. informed about it.
“Sri Lanka has requested an additional $1 billion line of credit from India for essential imports,” the second source said. “This will be in addition to the $1 billion line of credit already pledged by India.”
Both sources declined to be identified as the discussions were confidential.
Sri Lanka’s finance and foreign ministries, as well as India’s foreign ministry, did not immediately respond to requests for comment.
Sri Lankan Finance Minister Basil Rajapaksa this month signed the first $1 billion line of credit in India’s capital, New Delhi, to help pay for essential imports.
Indian Foreign Minister Subrahmanyam Jaishankar met Rajapaksa on Monday after arriving in the Sri Lankan capital of Colombo late the day before.
“Discussed the economic situation and India’s supportive response,” Jaishankar posted on Twitter, along with a photo of the two officials together.
In addition to the lines of credit, India extended a $400 million currency swap and a $500 million line of credit for fuel purchases in Sri Lanka earlier this year.
Sri Lanka’s imports stagnated, causing shortages of many essential items, after foreign currency reserves fell to $2.31 billion in February.
The nation, just off the southern tip of India, has to pay around $4 billion in debt over the rest of the year, including a $1 billion international sovereign bond that matures in July.
Rajapaksa is due to fly to Washington, DC next month to begin talks with the International Monetary Fund (IMF) for a bailout.
“India is also very supportive of Sri Lanka’s decision to apply for an IMF program and has given its fullest support,” one of the sources added.
