Owing to a severe foreign exchange crisis in the island nation, Sri Lanka has asked for a $ 500 million credit line from India for the repayment of its crude oil purchases. Recently energy minister Udaya Gammanpila had warned that the current availability of fuel in the country is critical and will only last up to next January at maximum.
The state oil distributors of the country import crude oil from the Middle East and refined products from other areas, including Singapore.
State-owned Ceylon Petroleum Corporation (CPC) of Sri Lanka owes about $3.3 billion to its government banks, namely, People’s Bank and Bank of Ceylon.
“We are currently engaged with the Indian High Commission here to obtain the facility (USD 500 million credit line) under the India-Sri Lanka economic partnership arrangement,” Sumith Wijesinghe, Chairman of the CPC, was quoted saying by the Financial Express.
He further added that this facility will now be utilised for purchasing their requirements for petrol and diesel. The energy secretaries of India and Sri Lanka are set to sign an agreement for the loan soon, Sri Lanka’s Finance Secretary S R Attygalle stated.
Oil prices witnessed a major price hike on a global level this year, causing shortages and emergencies in several countries. Sri Lanka being one of them, had to resort to increasing imports to meet its demands. The expenditure on oil by the island nation this year has plunged 41.5 per cent to $2 billion in the first seven months of this year, compared to last year.
Finance Minister Basil Rajapaksa had also mentioned the situation last month, saying Sri Lanka is facing a severe foreign exchange crisis after the pandemic hit the nation’s earnings from tourism and remittances.
Sri Lanka’s GDP contracted by a record 3.6 per cent in 2020 and its foreign exchange reserves saw a steep fall by over a half in one year through July to just $2.8 billion. the Sri Lankan rupee hence has witnessed a 9 per cent depreciation against the dollar over the past one year, making imports more expensive.
The centre had hiked prices of cooking gas and other essentials in the country last week, though the hike in the retail price of fuel has been kept on hold for now.