Sri Lanka seeks $500 million loan from India for fuel purchase

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

The move came few days after energy minister Udaya Gammanpila warned that the current availability of fuel in the country can be guaranteed only till next January.

The state-run Ceylon Petroleum Corporation (CPC) owes nearly USD 3.3 billion to the two main government banks — Bank of Ceylon and People’s Bank. The state oil distributors imports crude from the Middle East and refined products from other areas, including Singapore.

“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,” the Press Trust of India quoted CPC Chairman Sumith Wijesinghe as saying.

He said the facility would be utilised for purchasing petrol and diesel requirements.

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

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

The price hike in the global oil prices has forced Lanka to spend more on oil imports this year. The country’s oil bill has jumped 41.5 per cent to USD 2 billion in the first seven months of this year, compared to last year.

Lanka is facing a severe foreign exchange crisis after the pandemic hit the nation’s earnings from tourism and remittances, Finance Minister Basil Rajapaksa had said last month.

The country’s GDP contracted by a record 3.6 per cent in 2020 and its foreign exchange reserves plunged by over a half in one year through July to just USD 2.8 billion. This has led to a 9 per cent depreciation of the Sri Lankan rupee against the dollar over the past one year, making imports more expensive. (Colombo Gazette)

3 COMMENTS

  1. Translation:

    I inform my bank manager that I cannot possibly make a payment on my overdrawn credit card in my lifetime. I then request an increase in the credit limit so that I can make the monthly payment. Amazingly, the request is granted.

    Am I the only person laughing about this situation ?

  2. This foolish SLPP government and their 6.9 million voters are crashing our country while having kiribath, lighting fireworks and cheering on our downfall…

    Get ready for skyrocketing food and essentials prices, shortages, power crisis with increasing frequency in power cuts, Hyperinflation probably on the cards too.

    They are struggling to get through the year.
    Don’t know if the can make it through 3 more years…

    • SB Dissanayake was proud to have given us inflation. Imagine how thrilled the paddy cultivators willl be to give us Hyperinflation. Mokada eka ???

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