Sri Lanka extends credit line with India as China voices support | Investment News

COLOMBO (Reuters) – Sri Lanka has extended a $200 million line of credit with India to secure emergency fuel stocks, the country’s power and energy minister said on Monday. country, while China said it supported the island nation’s efforts to restructure its debt.

Colombo was also in talks with New Delhi on extending the line of credit for another $500 million, Minister Kanchana Wijesekera told a news conference, with four fuel shipments due to arrive in May.

Hard hit by the pandemic and strapped for revenue after Gotabaya Rajapaksa’s government imposed steep tax cuts, the island nation is now also strapped for foreign exchange and has approached the International Monetary Fund (IMF) for a recovery plan. emergency rescue.

Rampant inflation and shortages of imported food, fuel and medicine have led to weeks of sporadically violent protests.

Sri Lanka used $400 million, in several shipments in April, of the $500 million line of credit granted by India earlier this year, Wijesekera said. Two fuel shipments will be paid from the remaining funds in May.

“The Indian line of credit was extended by $200 million recently and it will be used for four shipments in May. Talks are continuing for another $500 million with India, so in total the line of credit will be $1.2 billion,” Wijesekera said.

However, Sri Lanka still faces payment difficulties for fuel imports, with the state-run Ceylon Petroleum Corporation (CPC) owing $235 million for shipments already received, while around $500 million additional will be required to pay maturing letters of credit over the next six years. weeks, he added.

Sri Lanka will also need dollars to pay for crude oil shipments to supplement imports from India.

“We have drawn up supply plans until June, but we still have to figure out how to find sufficient quantities of foreign currency to make the payments,” Wijesekera said.

Beijing Ambassador Qi Zhenhong told Sri Lankan Finance Minister Ali Sabry on Monday that China – one of the island’s largest bilateral lenders having provided around $6.5 billion in loans – supported its decision to work with the IMF to restructure its debt.

“Ambassador Zhenhong also assured Minister Ali Sabry that as a major shareholder of the IMF, China is ready to play an active role in encouraging the IMF to consider Sri Lanka’s position positively and reach an agreement. as soon as possible,” Sri Lanka’s finance ministry said. said in a statement.

(Reporting by Uditha Jayansinghe; Writing by Alasdair Pal; Editing by Catherine Evans and Hugh Lawson)

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