Sri Lanka Looks Towards India For USD 500 Million Loan For Oil Purchases

New Delhi: Sri Lanka is reeling under the worst forex crisis the county has ever faced. In order to purchase petroleum products, the Sri Lankan Cabinet has approved seeking a 500 million dollar loan from the Exim Bank of India. Sri Lanka has been mulling different options to facilitate measures to prevent fuel pumps from going dry, as the country faces a severe foreign exchange crisis to pay for its imports.Also Read – Sri Lanka Court Bans Ex-PM Mahinda Rajapaksa, Allies From Leaving Country

The country is grappling with an unprecedented economic turmoil, the worst since its independence from Britain in 1948. It is struggling with a shortage of almost all essentials, due to the lack of dollars to pay for the imports. Also Read – Why Did Indian Rupee Fall To All-Time Low Against Dollar On Monday? | Explained

At the Cabinet meeting held on Monday, a proposal was approved to seek an Indian Exim Bank loan to purchase fuel, Energy Minister Kanchana Wijesekera said on Tuesday. Also Read – Curfew Imposed in Entire Sri Lanka With Immediate Effect: Police Spokesperson

“In the present economic conditions prevailing approval was granted for the proposal by the power and energy minister to seek a 500 million dollar loan from the Indian Exim Bank for the purchase of petroleum products,” a Cabinet note said.

Already Received Money From Exim Bank

Sri Lanka had already received 500 million dollars from the Exim Bank of India and another 200 million from the State Bank of India for oil purchases, Wijesekara said. From June, Sri Lanka is estimated to need 530 million US dollars for fuel imports in the current forex crisis.

The crisis hit Sri Lanka on Tuesday and also raised the petrol price by 24.3 per cent and diesel by 38.4 per cent, a record hike in fuel prices amidst the country’s worst economic crisis due to the shortage of foreign exchange reserves.

How is India helping Sri Lanka?

India extended an additional USD 500 million credit line to Sri Lanka last month to help the neighbouring country import fuel as it has been struggling to pay for imports after its foreign exchange reserves plummeted sharply in recent times, causing a devaluation of its currency and spiralling inflation.

On Monday, India said it delivered around 40,000 metric tonnes of petrol to Sri Lanka, days after supplying 40,000 metric tonnes of diesel under the Indian credit line to help ease the acute fuel shortage.

(With PTI inputs)