Sri Lanka has increased its credit line with India by $200 million in order to purchase emergency gasoline supplies, according to the country’s power and energy minister, who also stated that China supports attempts to restructure the island nation’s debt.
Minister Kanchana Wijesekera told a news conference that Colombo was in talks with New Delhi to extend the credit line by an extra $500 million, with four gasoline shipments set to arrive in May.
The island nation is now severely short of foreign exchange, having been hit hard by the pandemic and short of revenue after Gotabaya Rajapaksa’s government-enforced steep tax cuts. It has sought the International Monetary Fund (IMF) for an emergency bailout.
Inflationary pressures and shortages of imported food, gasoline, and medications have sparked weeks of occasional violence.
Sri Lanka spent $400 million of the $500 million credit line given by India earlier this year on numerous shipments in April, according to Wijesekera. Two fuel shipments will be paid for from the remaining funds in May.
However, Sri Lanka continues to have payment issues for petroleum imports, with the state-owned Ceylon Petroleum Corporation (CPC) owing $235 million for shipments already received and another $500 million needed to pay for letters of credit maturing in the next six weeks, he noted.
Sri Lanka will also require dollars in order to pay for crude oil shipments in order to supplement its imports from India.