ECONOMYNEXT – Sri Lanka’s Finance Minister Basil Rajapaksa and Indias External Affairs Minister S Jaishankar has met to review 1.5 billion dollars in credit lines as the island struggles with foreign exchange shortages from loose monetary policy.
“The two Ministers reviewed the progress in extending Indian credit facility of USD 1 billion for importing food, essential items and medicine and USD 500 mn for importing fuel from India,” a statement said after a virtual meeting.
Sri Lanka in January formalized a 50 year lease for a tank farm near Trincomallee port to Indian Oil Corporation which is strategically important for India which is seen as a ‘goodwill gesture’.
Reserve Bank of India had released a 400 million US dollar swap and deferred 512.5 million US dollars in cross border payments for two months.
Sri Lanka has earlier reneged on a government-to-government agreement to give Colombo Ports East Terminal to India and also a floating LNG terminal.
After calling international tenders, the government is now trying to give the deal to an US company which has drawn protests from power sector unions.
India had also protested over Chinese companies winning bids to build renewable energy plants at three islands near India.
Minister Rajapaksa had “welcomed Indian investments in Sri Lanka in a number of important spheres including ports, infrastructure, energy, renewable energy, power and manufacturing and assured that conducive environment will be provided to encourage such investments,” the statement said.
“In this context, both Ministers noted that the recent steps taken by the Government of Sri Lanka for jointly modernizing Trincomalee Oil Tank Farms will boost confidence of investors, apart from enhancing Sri Lanka’s energy security.”
After Minister Rajapaksa and Indian ministers in early December over the 1.5 billion US dollars of credit lines Sri Lanka’s High Commission in New Delhi said “modalities to realize these objectives would be finalized early, within a mutually agreed timeline.”
There will also be “direct and regular contact with” between each other to co-ordinate and Ministers Sitharaman and Jaishankar agreed to open direct lines of communications” to co-ordinate the aid.
Foreign Minister Jaishanker had brought up the issue of Indian fishermen detained in Sri Lanka, during the virtual meeting and “urged the Government of Sri Lanka to ensure early release of the detained fishermen on humanitarian considerations.”
Sri Lanka is facing foreign exchange shortage mostly due to sterilization of dollars given for imports with new money. (Colombo/Jan16/2021)