Colombo, Jan 18 (IANS): Battered by mounting debt and dollar crises with no cash to buy fuel and all stocks have run dry, India on Tuesday came to rescue Sri Lanka with a new Line of Credit (LOC) of $500 million for purchase of petroleum products.
The new LOC follows Indian External Affairs Minister S. Jaishankar's virtual talks on Saturday (January 15) with Sri Lanka's Finance Minister Basil Rajapaksa wherein Sri Lanka reviewed an urgent credit facility of $1.5 billion to import food, medicines, and fuel.
The discussion between the two ministers took place following India extending a $400 million under the SAARC currency swap arrangement and deferred a settlement of $515.2 million to the Asian Clearing Union (ACU) by two months, on Thursday, January 13.
"External Affairs Minister S Jaishankar extended this critical support in his letter addressed to the Foreign Minister of Sri Lanka, Prof GL Peiris," Indian High Commission in Colombo stated on Tuesday.
"It would be recalled that in a landmark development, External Affairs Minister S Jaishankar and Minister of Finance, Basil Rajapaksa held a detailed virtual meeting on January 15, 2022 and discussed various aspects of robust economic partnership between India and Sri Lanka. Early operationalization of the LOC will help realize one of the four pillars of economic cooperation identified during the visit of Basil Rajapaksa to India in December 2021," India HC statement noted.
Recently, India had extended foreign exchange support of over $900 million to Sri Lanka. These measures are in line with India's commitment to stand with Sri Lanka, contribute to Sri Lanka's economic growth and impart greater momentum to bilateral economic and commercial partnership, the High Commission noted.
Sri Lanka faces one of its worst economic crisis with credit crunch with country's credit has been downgraded to 'CCC' and 'CC' by Standard and Poor's and Fitch over risks of default. However, on Tuesday the country paid $500 million sovereign bond that fell due on January 2021, Central Bank Governor Nivard Cabaal stated.
Besides, Sri Lanka is facing a major crisis with regard import of fuel and connecting to it a power crisis as country's power generation is mainly depends on fuel.