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Tuesday May 17th, 2022
Economy

Sri Lanka makes progress on US$1.9bn credit lines, swap from India during Finance Minister visit

ECONOMYNEXT – Sri Lanka has made progress in getting a central bank swap, credit lines for fuel, food and medicines on which a timeline has to be agreed, during a visit to India by Finance Minister Basil Rajapaksa, the island’s High Commission in New Delhi said.

Minister Rajapaksa had two rounds of joint discussions with Finance and Corporate Affairs Minister Nirmala Sitharaman and External Affairs Minister Subrahmanyam Jaishankar.

Two sources familiar with the talks said a total of 1.9 billion dollars of assistance was discussed, a 400 million dollar swap and a 500 million dollar credit line for fuel with an expectation of a currency swap materializing.

“The credit line is not free and it is with conditions,” a second source said. “Basically we need to import everything from India. The money could only be used for Indian imports.”

Sri Lanka’s embassy in New Delhi said four issues had been discussed “for short and medium-term cooperation” at a “mutually agreed timeline”.

These were:

i) A food and health security package on an urgent basis that would envisage an extension of a line of credit to cover the import of food, medicines and other essential items from India to Sri Lanka.

ii) Energy security package that would include a line of credit to cover import of fuel from India, and an early modernization of Trincomalee Tank Farm.

iii) Offer of a Currency Swap to help Sri Lanka address the current balance of payment issues

iv) Facilitating Indian investments in different sectors in Sri Lanka that would contribute to growth and expand employment. This will build on recent trends in that respect.

“It was agreed that modalities to realize these objectives would be finalized early, within a mutually agreed timeline,” the statement said.

“Minister Rajapaksa and Ministers Sitharaman and Jaishankar agreed to open direct lines of communication and to be in direct and regular contact with each other in order to coordinate the above initiative.”

Sri Lanka is gradually building up its ties with India after President Gotabaya Rajapaksa’s government cancelled a 500 million US dollar East Container Terminal (ECT) deal with India and Japan on top of renewable power projects near India being awarded to a Chinese firm.

Later the Sri Lankan government gave 800 million US dollar West Container Terminal (WCT) Port deal to India while not allowing Chinese company to start the energy project in Sri Lanka’s north. (Colombo/Dec4/2021)

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