India extends $500-million LOC for fuel purchases to Sri Lanka

INTERNATIONAL DESK: India on Wednesday extended a $500-million line of credit for purchasing petroleum products to Sri Lanka, currently grappling with its worst foreign exchange and energy crisis in decades.

India’s Export Import (Exim) Bank and the Sri Lankan government signed an agreement for the line of credit in the presence of Sri Lankan finance minister Basil Rajapaksa and Indian envoy Gopal Baglay. Rajapaksa has been coordinating his government’s efforts to seek financial assistance from India to tide over the crisis.

The Indian government’s support for fuel imports through the line of credit is in response to Colombo’s “urgent requirement”, the Indian high commission said in a statement.

The statement added this critical support was extended following a virtual meeting between external affairs minister S Jaishankar and Rajapaksa on January 15, during which they discussed a range of issues.

The Sri Lankan government decided on Tuesday to purchase 40,000 tonnes each of petrol and diesel from the Indian Oil Corporation.

In recent weeks, India has extended a Saarc currency swap facility of $400 million and deferred the payment of $515.2 million to the Asian Clearing Union (ACU) by two months to assist Sri Lanka. India is also expected to extend a credit facility of $1 billion for importing food, essential items and medicines.

“As Sri Lanka’s closest neighbour and long-standing partner, India is committed to assist Sri Lanka in its post-Covid economic recovery. Signing of the LOC Agreement is another landmark in our bilateral cooperation and is in continuation of India’s recent foreign exchange support of over $900 million to Sri Lanka,” the statement said.

These measures were in line with discussions between the two sides during Rajapaksa’s visit to New Delhi last December. With the latest support, India’s overall developmental assistance to Sri Lanka stands at close to $4 billion.

The line of credit for fuel purchases was being negotiated since August 2021, and it will help ease pressure on Sri Lanka’s rapidly dwindling foreign currency reserves that fell to $3.1 billion in December. Sri Lanka’s energy minister Udaya Gammanpila had recently predicted fuel shortages because of the inability to pay for oil imports.

(Hindustan Times)