India to extend $1 billion credit line to Sri Lanka amid economic crisis

WION Web Team
New Delhi Updated: Mar 18, 2022, 06:29 PM(IST)

People stand in a queue to buy kerosene oil for home use at a petrol station in Colombo Photograph:( AFP )

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Sri Lanka has been hit by rising fuel prices including power shortages as it struggles to service its foreign debt.

As the Sri Lankan government sought a bailout from the International Monetary Fund (IMF), the Rajapaksa government confirmed that India will provide $1 billion line of credit facility to the country.

India's credit facility would be used for food, medicine and other essential items, the Lankan government said. India had earlier extended 500 million credit to purchase petroleum products as the country grapples with harsh economic condictions.

Reports claim finance minister Basil Rajapaksha is expected to meet his Indian counterpart Nirmala Sitharaman. The Sri Lankan finance minister had met Prime Minister Narendra Modi and foreign minister S Jaishankar on Wednesday.

Watch: India extends $1 billion line of credit to Sri Lanka

Ratings Agency Fitch and Moody's had downgraded the country due to delays in obtaining new funds.

Indian foreign affairs minister S Jaishankar had said: "India stands with Sri Lanka, adding,"$1 billion credit line signed for supply of essential commodities."  

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IMF spokesman Gerry Rice had said earlier that it could "assist Sri Lanka going forward". Sri Lanka had earlier urged China for debt payment but it hasn't come through as yet.

Also Read: Sri Lanka's central bank assures country's currency to stabilise soon

Sri Lanka has been hit by rising fuel prices including power shortages as it struggles to service its foreign debt. There have been large scale protests against the government over the economic crisis sweeping the country with the opposition party spearheading the anti-government demonstrations.

The country has also been hit by high inflation and food crisis even as its robust tourism industry has been hit by the coronavirus crisis.

The Lankan government had imposed a fertiliser ban in May last year to turn the nation's agriculture sector into hundred per cent organic, however, it led to a decline in crop production and an increase in food prices.

(With inputs from Agencies)

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