The Indian High Commission in Colombo came up with a statement on Tuesday that India presented a fresh $500 million Credit Line to Sri Lanka to fund fuel purchases as the country struggles to manage its worst financial crisis in years. The previous week India also granted Sri Lanka a $400 million swap arrangement to boost its reserves and help repay debt.
The credit line, which was beneath negotiation since August 2021, will ease pressure on the country’s diminishing reserves that dipped to $3.1 billion at the end of December.
“Today we are encountering the climax of a problem for which a number of governments have failed to provide a lasting solution…More than $6 billion a year in foreign debt is to be repaid over the next two years. It is the loans taken by all previous governments from time to time that we have to repay,” President Gotabaya Rajapaksa said.
Economic analysts and opposition politicians defer the payment because of the severe foreign exchange crisis. The compensation of these bonds was allocated in 2012 despite contrasting opinions. The international rating agencies had voiced suspicions over the island nation’s ability to meet its international sovereign bond payments of $1.5 billion, including the first $500 million which matured on Tuesday.
Shipments are getting held up at the port, while power cuts are imposed as the energy sector has been hit due to the forex crisis. They claimed that the nation’s foreign currency reserves should be used to pay for the imports of essentials. Deficiencies of food and essentials are prevailing due to the scarcity of foreign exchange.
The next bond payment amounting to $1 billion is due in July. The total debt owed by Lanka this year is over $6 billion.