Sri Lanka seeks $500 million credit line from India amid inflation crisis

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Sri Lanka seeks $500 million credit line from India amid inflation crisis

Sri Lanka has sought a USD 500 million credit line from India to pay for its crude oil purchases amid a severe inflation crisis in the island nation.

The move came few days after energy minister Udaya Gammanpila informed that the current fuel availability in the country can only be guaranteed until January 2014.

The State-controlled CPC of the Ceylon Petroleum Corporation owes almost USD 3.3 billion to the two main government banks - Bank of Ceylon and People’s Bank. The state oil distributor imports crude from the Middle East and refined products from other areas, such as Singapore.

We are currently engaged with the Indian High Commission in this position to obtain the facility of USD 500 million credit line under the Economic Partnership arrangement, CPC Chairman Sumith Wijesinghe was quoted as saying by local news website NewsFirst.lk.

He said the facility could be utilised for purchasing petrol and diesel needs.

The energy secretaries of both India and Lanka are expected to sign an agreement for the soon, the report quoted Secretary S R Attygalle as saying.

The government has put the expected increase in the retail price of fuel on hold despite the last week's increase in cooking gas and other essentials.

The price hike on global oil prices forced Lanka to spend more on oil imports in the last few months. The country's oil bill increased 41.5 per cent to 2 billion in the first seven months of this year compared with last year.

If the pandemic destroyed the nation's currency, the country would face a severe foreign exchange crisis as Minister Basil Rajapaksa said it affected the country's tourism and remittances.

The country's GDP plunged by a record 3.6 per cent in 2020 and its GDP contracted by over a half in one year to just USD 2.8 billion. This has led to the depreciation of the Sri Lankan rupee in the last one year against the dollar, making imports more expensive.