Crisis-hit Sri Lanka seeks further $1 billion credit line from India: Report

SriLankahas sought an additionalcreditlineof $1billionfromIndiato import essentials amid its worst economiccrisisin decades, twosourcessaid on Monday, as theIndian foreign minister began talks with the government of its neighbour.

The island nation is struggling to pay for essential imports of food and fuel after a 70 per centdrop in foreign exchange reserves since January 2020 led to a currency devaluation and efforts to seek helpfromglobal lenders.

New Delhi has indicated it would meet the request for the newline, to be used for importing essential items such as rice, wheat flour, pulses, sugar and medicines, said one of thesourcesbriefed on the matter.

"SriLankahas requested an additional $1billioncreditlinefromIndiafor imports of essentials," the second source said. "This will be on top of the $1-billioncreditlinealready pledged byIndia."

Bothsourcesdeclined to be identified as the discussions were confidential.

The finance and foreign ministries ofSriLanka, as well asIndia's foreign ministry, did not immediately respond to requests seeking comment.

SriLankan Finance Minister Basil Rajapaksa signed the earliercreditlineof $1billionthis month in theIndian capital of New Delhi to help pay for critical imports.

Indian Foreign Minister Subrahmanyam Jaishankar met Rajapaksa on Monday after arriving in theSriLankan capital of Colombo late the previous day.

"Discussed the economic situation andIndia's supportive response," Jaishankar said on Twitter, with a photograph of the two officials next to each other.

In addition to thecreditlines,Indiaextended a $400-million currency swap and a $500-millioncreditlinefor fuel purchases toSriLankaearlier this year.

SriLanka's imports stalled, causing shortages of many essential items, after foreign currency reserves fell to $2.31billionby February.

The nation just offIndia's southern tip has to repay debt of about $4billionin the rest of this year, including a $1-billioninternational sovereign bond that matures in July.

Rajapaksa is set to fly to Washington, D.C. next month to start talks with the International Monetary Fund (IMF) for a rescue plan.

"Indiais also very supportive ofSriLanka's decision to seek an IMF programme and has given their fullest support," one of thesourcesadded.

Watch |Sri Lanka: Indian EAM Jaishankar, PM Modi to attend 3-day Bimstec summit