India extends its current line of credit to Sri Lanka by $200m for the purchase of fuel: energy minister

India has extended its current line of credit by another $200 million to replenish Sri Lanka’s rapidly depleting fuel stocks, Power and Energy Minister Kanchana Wijesekera said on Monday. Sri Lanka is currently in the throes of an economic crisis not seen since its independence from Britain in 1948. The crisis is caused in part by a lack of foreign currency, which means the country cannot afford to pay imports of staple foods and fuel. , leading to acute shortages and very high prices. India has already given an additional 200 million dollars which will be used for 4 other expeditions (in May). Apart from that, we are also in discussion with India for another $500 million line of credit but it is not finalized yet, Wijesekara told reporters.

Sri Lanka used $400m from India’s $500m line of credit in March and April, and the two fuel deliveries will be paid for with the remaining funds this month, the minister said . India has already agreed to defer $1.5 billion in import payments Sri Lanka has to make to the Asian Clearing Union. Last month, New Delhi also extended the term of a $400 million swap granted in January this year, the Indian High Commission said. The Sri Lankan government has said it will temporarily default on $35.5 billion in external debt as the pandemic and war in Ukraine have made payments to foreign creditors impossible. Gotabaya Rajapaksa’s regime has also requested a bailout from the International Monetary Fund, which could take up to three months to arrive.

Wijesekara said the monthly cost of fuel imports in May was estimated to be around $580 million, up from $200 million three months ago, due to soaring global oil prices. Fuel imports from India notwithstanding, Sri Lanka will also face the lack of dollars to pay for its crude oil shipments.

Months of long blackouts and severe shortages of food, fuel and pharmaceuticals have sparked widespread protests calling for the government to resign. According to data released by the government’s Bureau of Census and Statistics, headline inflation hit 29.8 percent in April, down from 18.7 percent in March.

Food inflation rose from 30.21% in March to 46.6% in April. Most food products recorded price increases.

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