In the midst of the economic crisis in Sri Lanka, India has decided to deploy additional monetary assistance to the island nation. Sri Lankan Finance Minister Ali Sabry on Friday announced that India has agreed to provide an additional USD 500 million credit (Rs 38,23,18,50,000) line to help Sri Lanka import petroleum despite delays in negotiating a bailout package with the International Monetary Fund (IMF) to alleviate the country’s acute financial predicament, as per the reports of PTI.

It is pertinent to mention here that Sri Lanka has been unable to pay for imports as a result of a dramatic drop in its foreign exchange reserves, which has resulted in currency depreciation and spiralling inflation. Sri Lankan Finance Minister further added that as India has agreed to offer an additional USD 500 million for the gasoline imports, he hopes that India would consider further extending a credit line worth another USD 1 billion.

Sabry negotiating with the International Monetary Fund

Sabry is currently in Washington, DC, negotiating with the International Monetary Fund on the matter. He stated that discussions on an Extended Fund Facility had commenced, however, it is still being worked out. Sri Lanka requires at least USD 4 billion to address its rising economic problems, and Sabry has been in talks with international institutions such as the World Bank and countries such as China and Japan for financial aid.

The Finance Minister also noted that the next nine months are going to be rough, adding that there will be a need to bring in more investments from the US into the central bank during that time, according to PTI. He also claimed that Sri Lanka is in talks with a number of countries and if these measures succeed, around USD 2 billion in investment will come to the central bank, which will assist in stopping the depreciation and stabilise the currency. It is pertinent to note that Sri Lanka ceased debt servicing for the first time in its history on April 12.

Sri Lanka temporarily default on USD 35.5 billion in international debt

The Sri Lankan government announced last week that it would temporarily default on USD 35.5 billion in international debt due to the pandemic and the conflict in Ukraine, which rendered payments to foreign creditors impossible. In recent weeks, Sri Lanka has seen huge anti-government rallies as a result of the country’s financial crisis, which has resulted in food shortages, increasing fuel costs and massive power outages.

(Inputs from PTI)