India extends $500 million lines of credit help to Sri Lanka purchase fuel

India extends $500 million lines of credit help to Sri Lanka purchase fuel

On Tuesday, India announced a $500 million credit line to help Sri Lanka purchase petroleum products as the island country struggles with a massive fuel and energy crisis.

The Indian High Commission said External Affairs Minister S Jaishankar has agreed to offer critical support and the $500 million credit line in a letter to Sri Lankan Foreign Minister G L Peiris.

The island nation faces a significant foreign exchange shortage with falling reserves.

This has led to the currency losing value, making imports costly.

The country is struggling with almost all essentials, including fuel.

The state power utilities cannot run turbines, and power cuts are imposed at peak hours.

Power Minister Gamini Lokuge was supposed to hold talks with the Indian Oil Corporation (IOC) on Tuesday as part of a desperate measure to tide over the crisis.

However, those talks are said to have fallen through.

Lokuge said.

"The IOC said they are unable to supply fuel to Ceylon Electricity Board (CEB) because they do not have extra supply,"

India extends 500 million lines of credit help to Sri Lanka purchase fuel 1pixabay image

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On Tuesday, the CEB Engineers' Union said the island is expected to endure power cuts of up to 4 hours daily.

Meanwhile, the state fuel entity has stopped oil supplies as the electricity board has large unpaid bills.

The only refinery was recently shut as it could not pay dollars for crude imports.

Early this week, the Indian government announced a billion-dollar assistance package and other balance of payment support to Sri Lanka.

The billion-dollar loan credit facility is used to avert a food crisis while allowing for the import of items and medicines.

Besides, Sri Lanka is facing a significant crisis regarding the import of fuel and connecting a power crisis as the country's power generation mainly depends on energy.

The island country faces one of the worst economic crises with a credit crunch. The country's credit has been downgraded to 'CCC' and 'CC' by Standard and Poor's and Fitch over default risks. However, on Tuesday, the country paid a $500 million sovereign bond that fell due on January 2021, Central Bank Governor Nivard Cabaal stated.

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