ECONOMYNEXT – A fresh $500 million Indian fuel credit line to Sri Lanka has been delayed due to some routine administration process among its bureaucracy though there has been no negative remarks about the new loan, Power and Energy Minister Kanchana Wijesekera said.
India has already lent $700 million – $500 million from the first fuel credit line and another $200 million from the credit line allocated for essential commodities – to buy fuel when the country had a foreign exchange crisis.
Sri Lanka is in discussion with India’s Exim Bank to borrow another $500 million as fuel credit, but Minister Wijesekera said the loan has yet to be materialized and facing some administration delays.
Minister’s comments come as Sri Lanka has no scheduled fuel shipment for the state-run Ceylon Petroleum Corporation (CPC) in the foreseeable future. The government has already asked most of its 1.5 million government servants to work from home while closed most of schools to save fuel by reducing transports.
“I don’t know the exact details, but there are questions being asked how we are going to pay the money back, because it’s a credit line,” Wijesekara told reporters at a media briefing in Colombo on Sunday (26).
“So the administration question that the Exim Bank and the central bank of India raised is the ability to pay back the loans.”
Sri Lanka has already declared sovereign debt default on April 12 and no foreign country is lending to Sri Lanka at the moment given its default rating by global rating agencies.
Sri Lanka has lost its option of 90-day and 180-day credits for fuel payment after the default. Government officials say the country has to make a payment first and order fuel unlike earlier and the stocks expected only after a few weeks.
Sri Lanka has been largely depending on India for fuel since late in March.
“Any financial institute, when they lending money they look at the possibility of how they are going to get paid back. Those are the administration questions that are being looked at,” Wijesekara said.
“But they have not communicated any negative remarks on Indian $500 million credit line. They are very positive about it. They have their own system on that. They have to sort them out internally. It is not just like Sri Lankan system. When your cabinet take a decision to extend it, they have their own system.”
“Of course, we have seen Prime Minister Narendra Modi, the foreign minister, the Finance Minister and everyone in the government have backed this credit line being extended to Sri Lanka. But when the do the extension, they have to do their administration routine finalizing.” (Colombo/June 27/2022)