Sri Lanka Sought an Additional Credit Line of $1.5 Billion From India

Sri Lanka is seeking an additional credit line of $1.5 billion from India to import essentials after its worst economic crisis, the governor of the central bank of Sri Lanka said on Monday.

Sri Lanka is struggling to pay for essential imports after a 70% drop in foreign exchange reserves in two years led to a currency devaluation and efforts to seek help from global lenders.

As the Sri Lankan government prepares to negotiate with the International Monetary Fund amid concerns about its ability to repay its foreign debt, fuel shortages, food prices are soaring and protests have broken out. 

The new credit line would be on top of the $1 billion support extended by India to help pay for critical imports when the Finance Minister of Sri Lanka, Basil Rajapaksa travelled to New Delhi earlier this month.

New Delhi has indicated that it would fulfil the request for the new credit line, to be used to import essentials such as rice, flour, wheat, sugar and medicines.

India has extended a $400 million currency swap and a $500 million credit line for fuel purchases to Sri Lanka in addition to the latest credit lines. Stalled imports have caused shortages of many essential items in Sri Lanka after foreign currency reserves fell to $2.31 billion by February.

Sri Lanka also has to repay a debt of around $4 billion in the rest of this year along with a $1 billion sovereign bond that will mature in July. 

Finance minister Rajapaksa will head to Washington, DC next month to start talks with the IMF for a rescue plan and also seek support from the World Bank. India is supportive of its decision to seek an IMF programme and has given full support.