Due to a severe currency crisis in the island nation, Sri Lanka has requested a $ 500 million line of credit from India for repayment of its crude oil purchases. Recently, the Minister of Energy, Udaya Gammanpila, warned that the current availability of fuel in the country was critical and would only last at most until next January.
The country’s state-owned oil distributors import crude oil from the Middle East and refined products from other regions, including Singapore.
Sri Lanka’s state-owned Ceylon Petroleum Corporation (CPC) owes around $ 3.3 billion to its government banks, namely the People’s Bank and the Bank of Ceylon.
“We are currently engaged with the Indian High Commission here to obtain the facility ($ 500 million line of credit) under the India-Sri Lanka Economic Partnership Agreement,” said Sumith Wijesinghe, Chairman of the CPC. , cited by Financial Express.
He further added that this facility will now be used to purchase their gasoline and diesel needs. The energy secretaries of India and Sri Lanka are expected to sign an agreement for the loan soon, Sri Lanka Finance Secretary SR Attygalle said.
Oil prices have seen a significant rise in prices globally this year, causing shortages and emergencies in several countries. Sri Lanka being one of them, had to resort to increasing imports to meet its demands. The island nation’s oil spending this year fell 41.5% to $ 2 billion in the first seven months of this year, compared to a year ago.
Finance Minister Basil Rajapaksa also spoke about the situation last month, saying Sri Lanka faces a severe currency crisis after the pandemic hit the country’s income from tourism and remittances.
Sri Lanka’s GDP contracted a record 3.6% in 2020 and its foreign exchange reserves fell sharply by more than half in one year through July to just 2. $ 8 billion. the Sri Lankan rupee has therefore depreciated 9 percent against the dollar over the past year, making imports more expensive.
The center had raised the prices of cooking gas and other essentials in the country last week, although the hike in the retail price of fuel has been suspended for now.