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India extends $1-billion line of credit to Sri Lanka

The assistance is to enable Sri Lanka to import food, other essential commodities and medicines from India, and was described by an Indian official as a “humanitarian measure to help the Sri Lankan people during a difficult time”.

Sri Lanka Finance Minister Basil Rajapaksa with External Affairs Minister S. Jaishankar, Finance Minister Nirmala Sithraman and others during the agreement signing between SBI and Government of Sri Lanka for $1 billion credit facility for procurement of food, medicine and other essential items, in New Delhi. (PTI Photo)

INDIA ON Thursday extended a $1 billion credit facility to Sri Lanka which is in the midst of a severe economic crisis triggered by a shortage of foreign exchange.

The “short term concessional loan facility” will be provided by State Bank of India, under an agreement signed between the two governments on Thursday during the visit of Sri Lankan Finance Minister Basil Rajapaksa. Finance Minister Nirmala Sitharaman and External Affairs Minister S Jaishankar were present at the signing.

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“Neighborhood first. India stands with Sri Lanka. US$ 1 billion credit line signed for supply of essential commodities. Key element of the package of support extended by India,” Jaishankar tweeted.

The assistance is to enable Sri Lanka to import food, other essential commodities and medicines from India, and was described by an Indian official as a “humanitarian measure to help the Sri Lankan people during a difficult time”.

With this, Delhi has provided a total financial assistance of $2.4 billion to Sri Lanka since January, but this will only partially help mitigate the country’s economic meltdown.

On Wednesday, as his brother Basil Rajapaksa arrived in Delhi to finalise the credit line, President Gotabaya Rajapaksa said in an address to the nation that his government would work with the International Monetary Fund (IMF) to tide over the crisis.

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The Indian Express has learnt that India has agreed to assist Sri Lanka in its negotiations with the IMF.

President Rajapaksa spoke after days of massive protests over the shortages and steep prices that have created day-to-day uncertainties for Sri Lankans across the country.

Earlier this week, thousands of protesters jammed the main Galle Road in Colombo, some of them even entering the President’s Office. “Go Gota Go” and “Sir Fail” have been resounding at protests across the country.

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President Rajapaksa said in his televised address that Sri Lanka would have a trade deficit of $10 billion this year and “the situation will continue for reasons beyond our control”, though his government was “making maximum possible efforts” to ease the crisis.

A media release from the Sri Lankan High Commission in Delhi said the two sides have agreed to set up a framework for “short, medium and long-term economic cooperation between the two countries, aimed at addressing Sri Lanka’s present economic challenges”.

According to the statement, the three ministers — Rajapaksa, Sitharaman and Jaishankar — have “agreed to stay in regular contact and a co-ordinating mechanism consisting of senior officials from the two countries was set up to maintain a regular dialogue”.

Jaishankar will travel to Colombo later this month for the BIMSTEC ministerial meeting, and the bilateral “conversation can continue there” said an official.

Along with India’s emergency financial assistance, Delhi has also conveyed to Colombo that Indian investments in renewable energy, ports, logistics, infrastructure and connectivity will help Sri Lanka build capacity “holistically”, repairing its economy.

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India’s NTPC last week signed an agreement for setting up a solar plant in Sampur in the eastern province of Trincomalee, while the Adani group has signed up for another wind/ solar project in the Mannar and Ponneryn areas of northern Sri Lanka. Indian Oil subsidiary Lanka India Oil Corporation and Ceylong Petroleum have signed an agreement to jointly develop the Trincomalee Oil Tank Farm. Delhi is also pushing for joint development of the Palaly airport and Kankesanthurai harbour in the northern Jaffna peninsula.

First published on: 17-03-2022 at 22:40 IST
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