Sri Lanka Seeks Additional $1-Billion Credit Line From India, Says Report

Sri Lanka struggles to pay for essential imports of food and fuel after a 70 per cent drop in foreign exchange reserves since January 2020 led to a currency devaluation

Empty cans line up at a fuel station in Colombo as Sri Lanka has been severely hit by the lack of foreign exchange, resulting in severe shortages in food, fuel and imported goods. Image: Getty

New Delhi: Sri Lanka has sought an additional credit line of $1 billion from India to import essential items amid its worst economic crisis in decades.

News agency Reuters, quoting two sources on Monday reported as External Affairs Minister S Jaishankar began talks with the government of its neighbour.

The island nation in the Indian Ocean is facing an economic crisis as it struggles to pay for essential imports of food and fuel after a 70 per cent drop in foreign exchange reserves since January 2020 led to a currency devaluation and efforts to seek help from global lenders.

India has indicated it would meet the request for the new line, to be used for importing essential items such as rice, wheat flour, pulses, sugar and medicines, said one of the sources briefed on the matter.

The source said, “Sri Lanka has requested an additional $1 billion credit line from India for imports of essentials,” while adding that “This will be on top of the $1 billion credit line already pledged by India.”

Both the sources declined to be identified as the discussions were confidential.

The finance and foreign ministries of Sri Lanka, as well as India's foreign ministry, did not immediately respond to requests seeking comment.

Sri Lankan Finance Minister Basil Rajapaksa signed the earlier credit line of $1 billion in India this month to help pay for critical imports by Sri Lanka.

Since 2021, the economic situation in Sri Lanka has been getting worse as the government declared an economic emergency in the country. A sudden spike in food cost and fuel shortage compelled many to queue before grocery stores and petrol pumps.

News reports suggested rising cost of food items, sinking currency, and decreasing forex reserves have made matters worse for Sri Lankans. The current scenario in the island nation is worrisome as the country is on the verge of bankruptcy. Prices of essential commodities, including milk and rice skyrocketed, petrol and diesel not available and power stations shut.