- Monday, June 16, 2025
By: Shubham Ghosh
SRI LANKA on Wednesday (2) signed a credit line with India worth $500 million (£368 million) to import fuel, officials said, as the island-nation tries to resolve rolling power cuts while coping with a serious foreign-exchange crisis which has hurt its capacity to buy fuel for power plants.
The credit line will be provided to Colombo by the Export-Import Bank of India for buying petroleum products, India’s High Commission in Sri Lanka announced on Twitter.
The financial crisis that Lanka is currently facing is the worst in years with the country’s reserves hitting $3.1 billion (£2.2 billion) in December. The South Asian country has to repay about $4 billion (£2.9 billion) in debt repayments in the current year.
ALSO READ: India hopes to get more Indian aid worth £1.1b
Sri Lankan finance minister Basil Rajapaksa, a member of the ruling Rajapaksa family, said his country expects to receive another $1 billion (£736 million) credit line from India to purchase essential goods, including food and medicines by the end of the current month or early March.
India, Sri Lanka launch strategic oil deal to counter China
“Our priority is to get external debt on track this year. This fuel credit line will support our efforts,” Rajapaksa told reporters. “We expect the second credit line of $1billion to come through by the end of February or first week of March,” he added.
The minister said Sri Lanka will need $30 billion for imports and debt repayments in 2022.
Rising global oil prices have aggravated Sri Lanka’s economic problems with spending on oil imports climbing to about $500 million per month, Reuters reported.
Sri Lanka and India began negotiations over the credit line to import fuel in August.
Sri Lanka will pay LIBOR+1.25 per cent for the credit line, which will have a one year tenor, and can be subsequently renewed, Sri Lankan energy minister Udaya Gammanpila told Reuters.
The Sri Lankan government hopes to kick off 565,000 metric tonnes of imports from the first week of March and expects six petrol shipments and 10 diesel shipments, he added.
“Given the seriousness of Sri Lanka’s reserve situation this credit line will help but it is only increasing our indebtedness and not solving any problems,” Murtaza Jafferjee, economic analyst at J.B. Securities, said.
Sri Lanka is also in talks with Pakistan for a $200 million (£147 million) credit line to buy rice, cement and medicines, the country’s trade minister Bandula Gunawardena told Reuters.
“We have also started talks with Australia for another $200 million credit line to purchase grains and other staples,” he said.
“The government’s priority is to maintain reserves to repay our debt but also ensure there are no shortages of goods for citizens,” he added.
