Thursday, June 1, 2023

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India approves US$ 1Bn financing deal for Sri Lanka

The much delayed US$ 1 billion financing deal of India with Sri Lanka will be released soon following approval given by the Cabinet of Ministers India to disburse the loan facility, diplomatic sources revealed.

This was confirmed by the Secretary of the Finance Ministry of Sri Lanka S.R Artygalle adding that the relevant agreement will be signed soon.

India will release the requested financial assistance to the Government of Sri Lanka. However, it is difficult to give the exact dates of the disbursements,” the source noted. 

When questioned about the delay in disbursing the financial assistance, the oreign ministry official explained that the Indian Government had stopped credit lines for commodities and had to recommence the process once the Sri Lankan Government had presented such requests to the Indian Government. “This is the main reason for the delay,” he said.

The $ 1 billion facility sought by the Government will take more time due to the documentation process, it is learnt. However, the source downplayed whether the Indian financial support was being delayed pending a positive nudge from the Sri Lankan Government, like the agreement to jointly develop the Trincomalee Oil Tank Farm.

Energy Minister Udaya Gammanpila announced that Sri Lanka and India would jointly develop the oil tanks while the lease of the Lanka Indian Oil Company tanks was also extended by another 50 years.

 Apart from the $ 400 million swap facility, Sri Lanka has sought a $ 500 million credit line for fuel and a $ 1 billion credit line for food and medical purchases.

Sri Lanka’s dangerously low foreign reserves last week received a boost with the receipt of a Yuan 10 billion (equivalent to $ 1.5 billion) facility that was signed last March. The Chinese facility is to be utilised to pay Chinese import bills.

Household Economy, Microfinance, Employment and Business Development State Minister Shehan Semasinghe, confirmed that discussions are currently ongoing with India to borrow further US $ 1 billion.

“Finance Minister Basil Rajapaksa will finalise this facility soon,” he said. 

India has promised Sri Lanka a US $ 500 million credit facility for oil and another US $ 1 billion facility for essential goods such as food and medicine. 

Meanwhile, Semasinghe said that in addition to the Indian credit lines, the government is seeking funds from certain Middle Eastern banks. 

“The government is seeking credit facilities to the tune of US $ 2 billion from a number of Middle Eastern banks,” he disclosed. 

Commenting on the government’s plans to bolster its foreign reserves position, Semasinghe expressed confidence in Sri Lanka recording US $ 15 billion in exports this year and said plans are afoot to send 300,000 Sri Lankans abroad with a view of increasing foreign remittance.

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