India, Sri Lanka sign agreement for $1-billion line of credit

INTERNATIONAL DESK: India on Thursday extended a $1-billion short-term concessional loan to Sri Lanka to help the island nation cope with one of the worst economic crises in decades, with New Delhi saying the development reflected renewed momentum in bilateral economic engagement.

The line of credit, to be used to import food, medicines and other essential items from India, was extended at a time when President Gotabaya Rajapaksa’s government is grappling with mass protests by the opposition over its handling of the economic crisis.

Visiting Sri Lankan finance minister Basil Rajapaksa, his Indian counterpart Nirmala Sitharaman and external affairs minister S Jaishankar witnessed the signing of the agreement for the concessional loan extended by the Indian government through the State Bank of India.

“Neighbourhood first. India stands with Sri Lanka. US$ 1 billion credit line signed for supply of essential commodities. Key element of the package of support extended by India,” Jaishankar tweeted.

External affairs ministry spokesperson Arindam Bagchi told a media briefing that India is cognisant of the economic difficulties Sri Lanka is facing. “India has always stood with the people of Sri Lanka and we will continue to extend all possible support at this juncture,” he said.

In recent weeks, India has provided a $500-million line of credit to Sri Lanka for oil purchases and a currency swap of $400 million under the Saarc facility. It has also deferred the payment of $515 million due to the Asian Clearing Union. The $1-billion line of credit was the key component of a four-pillar economic cooperation arrangement finalised by the two sides during finance minister Rajapaksa’s visit to India last December.

Both countries understand the benefits of closer economic engagement and Sri Lanka is trying to attract Indian investments, which will strengthen several cooperation projects, Bagchi said. “We are happy to see the renewed momentum in overall economic engagement and linkages with Sri Lanka,” he added.

Economic ties between the two sides were affected last year when Sri Lanka abruptly scrapped a trilateral agreement with India and Japan for jointly developing the east container terminal of the strategic Colombo port. A majority of the goods moved through the port are trans-shipped to India.

Before the signing of the agreement for the line of credit, Rajapaksa held talks with Sitharaman and Jaishankar at the finance ministry. The two sides agreed to create a framework for short, medium and long-term economic cooperation between the two countries aimed at addressing Colombo’s current economic challenges, said a statement from the Sri Lankan high commission.

The three ministers agreed to stay in regular contact on this matter, and a coordinating mechanism comprising senior officials from the two countries was set up to maintain a regular dialogue, the statement said.

Rajapaksa also met power minister Raj Kumar Singh and discussed ways to deepen and broaden cooperation in the power and renewable energy sector. On Wednesday, Rajapaksa had held meetings with Prime Minister Narendra Modi and Jaishankar. (Hindustan Times)