Sri Lanka’s Cabinet has approved seeking a $500 million loan from Exim Bank of India to purchase petroleum products amid a severe foreign exchange crisis in the island nation.
Sri Lanka has been considering various ways to ease measures to prevent fuel pumps from drying up as the country faces a severe foreign exchange crisis to pay for its imports.
The country is grappling with unprecedented economic turmoil, the worst since gaining independence from Britain in 1948. It is struggling with shortages of almost every necessities of life as there are no dollars to pay for imports.
A proposal to apply for a loan from India’s Exim Bank to purchase fuel was adopted at the cabinet meeting held on Monday, Energy Minister Kanchana Wijesekera said on Tuesday.
“In the current economic conditions, the Energy and Energy Minister’s proposal to apply for a $500 million loan from India’s Exim Bank for the purchase of petroleum products has been approved,” a cabinet note said.
Sri Lanka has already received $500 million from the Exim Bank of India and another $200 million from the State Bank of India for oil purchases, Wijesekara said. As of June, Sri Lanka needs an estimated US$530 million for fuel imports amid the current foreign exchange crisis.
Crisis-stricken Sri Lanka hiked petrol prices by 24.3 percent and diesel prices by 38.4 percent on Tuesday, a record hike in fuel prices amid the country’s worst economic crisis due to tight foreign exchange reserves.
On Monday, India announced it had shipped around 40,000 tonnes of petrol to Sri Lanka days after it shipped 40,000 tonnes of diesel under India’s credit line to help alleviate acute fuel shortages.
India last month gave Sri Lanka an additional $500 million credit line to help the neighboring country import fuel as it struggled to pay for imports after its foreign exchange reserves plummeted recently, prompting a devaluation of its currency and rising inflation .
The economic crisis has also triggered a political crisis in Sri Lanka, calling for the resignation of President Gotabaya Rajapaksa. The crisis forced Prime Minister Mahinda Rajapaksa, the president’s older brother, to resign on May 9th.
Inflation nearing 40 percent, food, fuel and medicine shortages, and power outages have sparked nationwide protests and a depreciating currency as the government does not have enough foreign exchange reserves to pay for imports.
(This story was not edited by Business Standard staff and is automatically generated from a syndicated feed.)
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