India extends $500 million credit line to Sri Lanka to help buy fuel

India extends $500 million credit line to Sri Lanka to help buy fuel

Sri Lanka is currently facing a severe foreign exchange shortage with falling reserves. This has led to the currency losing value, making imports costly. The country is grappling with a shortage of almost all essentials, including fuel. The state power utilities are unable to run turbines and power cuts are imposed at peak hours.

In a letter to Sri Lankan Foreign Minister G L Peiris, Indian External Affairs Minister S Jaishankar promised to provide essential help and a $500 million credit line, according to the Indian High Commission. As the island nation grapples with a huge fuel and energy crisis, India established a $500 million credit line on Tuesday to assist Sri Lanka in purchasing petroleum supplies.

Power Minister Gamini Lokuge was supposed to hold talks with the Indian Oil Corporation (IOC) on Tuesday as part of a desperate measure to tide over the crisis. However, those talks are said to have fallen through. “The IOC said they are unable to supply fuel to Ceylon Electricity Board (CEB) because they do not have extra supply,” Lokuge said. The CEB Engineers’ Union on Tuesday said the island is expected to endure power-cuts of upto 4 hours daily.

Meanwhile, the state fuel entity has stopped oil supplies as the electricity board has large unpaid bills. The only refinery was recently shut as it was unable to pay dollars for crude imports. Early this week, the Indian government announced a billion dollar assistance package in addition to other balance of payment support to Sri Lanka. The billion dollar loan credit facility is to be used to avert a food crisis while allowing for the import of items and medicines.

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