India on Tuesday extended a $500 million line of credit to Sri Lanka for the import of fuel as a couple of power plants in the island country ran out of fuel amid a severe foreign exchange crisis. New Delhi has assured Sri Lanka of critical help in this challenging time. 

The Indian High Commission in Colombo confirmed in a tweet: “A friend holds out a helping hand again!!! Energizing bilateral economic partnership,#India offers a credit line of USD 500 mn to for [the] purchase of petroleum products.” 

This came after Indian External Affairs Minister S Jaishankar on Sunday held discussions with Sri Lankan Finance Minister Basit Rajapaksa. The $500 million line of credit is part of the larger $1.5 billion assistance that New Delhi has planned to assist Colombo. The rest $1 billion line of credit, yet to be extended, will cover the import of food, essentials, and medicines. 

Sri Lanka's foreign exchange reserve was around $3.1 billion by December last year. However, experts doubted the figure as it also included the Yuan 10 billion (roughly $1.5 billion). On Tuesday, the island country avoided default as it repaid a $500 million bond, Central Bank Governor Ajith Nivard Cabraal confirmed.    

In a speech delivered in Parliament, Sri Lankan President Gotabaya Rajapaksa termed the depleting forex as "the biggest challenge."

India’s $1.5 billion package assistance is in addition to $900 million that it had extended a few weeks ago in the form of loan repayment deferment and line of credit. New Delhi’s total assistance to Colombo will cross $2.4 billion in recent months. [Read More]

The day was full of anxiety in Colombo today as Sri Lankan Power Minister Gamini Yokuge set off alarm bells, warning about power outage as several power plants had had just enough fuel to operate just by evening. 

By afternoon, a couple of power plants stopped operations as they exhausted their fuel. Earlier on Monday, he said they were considering procuring fuel from India for their power plants as Ceylon Petroleum Corporation was failing to supply them on time. [Read More]

On Tuesday, he informed that he had sought fuel from India on an immediate basis as a few of the power plants exhausted their total stock. It is not yet clear if the Lanka Indian Oil Corporation (LIOC), a subsidiary of India's IOCL, has yet supplied fuel. 

(SAM)