- Thursday, April 25, 2024
By: Shubham Ghosh
SRI LANKA has sought a credit line from India worth $100 million (£72.7 million) to pay for its crude oil purchases amid a severe foreign-exchange crisis.
The move came just a few days after the country’s energy minister Udaya Gammanpila cautioned that availability of fuel could be guaranteed only till January 2022.
The state-run Ceylon Petroleum Corporation (CPC) owes nearly $3.3 billion (£2.4 billion) to the two main government banks – Bank of Ceylon and People’s Bank. The state oil distributors import crude from the Middle East and refined products from other areas, including Singapore.
“We are currently engaged with the Indian High Commission here to obtain the facility ($500 million credit line) under the India-Sri Lanka economic partnership arrangement,” CPC chairman Sumith Wijesinghe was quoted as saying by local news website newsfirst.lk.
He said the facility would be utilised for purchasing petrol and diesel requirements.
Energy secretaries from both India and Sri Lanka are expected to sign an agreement for the loan soon, the report quoted Sri Lankan finance secretary S R Attygalle as saying. The country’s government has put on hold the expected retail price hike of fuel despite last week’s increase in cooking gas and other essentials.
The hike in price in global oil prices has forced the island-nation to spend more on oil imports this year. The country’s oil bill has jumped 41.5 per cent to $2 billion (£1.4 billion) in the first seven months of 2021, compared to last year.
Lanka is facing a severe foreign-exchange crisis after the pandemic hit the nation’s earnings from tourism and remittances, its finance minister Basil Rajapaksa said last month.
The country’s GDP contracted by a record 3.6 per cent in 2020 and its foreign exchange reserves plunged by over a half in one year through July to just $2.8 billion (£2 billion), causing a nine per cent depreciation of the Sri Lankan rupee against the dollar over the past one year, making imports dearer.
It may be mentioned here that India extended a line of credit worth $100 million to Sri Lanka in June through Exim Bank to finance projects in the island-nation’s solar-energy sector.
