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Sri Lanka seeks $ 500 million line of credit from India to purchase fuel

Sri Lanka has requested a $ 500 million line of credit from India to pay for its crude oil purchases amid a severe currency crisis in the island nation.

The move came days after Energy Minister Udaya Gammanpila warned that the current availability of fuel in the country can only be guaranteed until next January.

The state-run Ceylon Petroleum Corporation (CPC) owes nearly $ 3.3 billion to the two major state-owned banks Bank of Ceylon and People’s Bank. State-owned petroleum distributors import crude from the Middle East and refined products from other regions, including Singapore.

We are currently in contact with the Indian High Commission here to obtain the facility ($ 500 million line of credit) under the India-Sri Lanka Economic Partnership Agreement, ”said CPC Chairman Sumith Wijesinghe , cited by local news site

He said the facility would be used to purchase gasoline and diesel.

The energy secretaries of India and Lanka are expected to sign an agreement for the loan soon, the report said, citing Finance Secretary SR Attygalle.

The government has suspended the expected hike in retail fuel prices despite last week’s increase in cooking gas and other essentials.

Rising global oil prices have forced Lanka to spend more on oil imports this year. The country’s oil bill jumped 41.5% to $ 2 billion in the first seven months of this year, compared to a year ago.

Lanka faces a severe currency crisis after the pandemic hit the country’s income from tourism and remittances, Finance Minister Basil Rajapaksa said last month.

The country’s GDP contracted a record 3.6% in 2020 and its foreign exchange reserves plunged by more than half in one year through July to just $ 2.8 billion . This has led to a 9 percent depreciation of the Sri Lankan rupee against the dollar over the past year, making imports more expensive.

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