On Tuesday provided another $500 million of the package to Sri Lanka for emergency fuel imports. India has extended this relief amount of $500 million on Line of Credit (LOC) to the island nation. Sri Lanka is currently facing their worst economic slowdown. They have exhausted their forex reserves and they have almost nothing in their treasury to import emergency products such as fuel, medicines, or any other emergency help. India has already provided $900 million in relief to Sri Lanka last week.
The Indian High Commission in Colombo released a statement that Indian External Minister Dr. S. Jaishankar has extended another critical support to the country in a letter addressed to Sri Lankan Foreign Minister Prof. G.L. Peiris. This will bring relief to the island nation in order to tackle the shortage of emergency supplies. This emergency assistance was asked by Sri Lanka from India so that they can move over the tide of their worst ever forex crunch that has led to a shortage of essential imports such as fuel, medicines, and certain food supplies.
India extended a $1.5 billion credit facility to Sri Lanka
The announcement of extended support came after a virtual meeting between External Minister Mr. Jaishankar and Sri Lanka’s Finance Minister Basil Rajapaksa on Saturday. The agenda of that virtual meeting was to review the $1.5 billion credit facility to help the island nation to control its fast-draining reserves especially to manage to import of crucial items such as food items, medicines, and fuel.
As suggested by some reports India has offered a total of $2.4 billion in credit assistance to Sri Lanka to battle the major economic crisis. The package released on Tuesday was supposed to use for fuel imports. The Indian High Commission said in their statement that these are measures in the lines of commitment to stand with Sri Lanka helping the nation in its economic growth and to make a greater impact on bilateral economic and commercial relationships between the two nations. The said LOC will coincide with Sri Lanka’s central bank servicing a sovereign bond of $500 million.
Why Sri Lanka is facing an economic slowdown?
Sri Lanka is facing their worst economic slowdown mostly brought due to the COVID-19 and poor economic management by current and previous governments. They have never tried to decrease the fiscal deficit making them susceptible to such economic slowdown. On Tuesday, Sri Lankan President Gotabaya Rajapaksa delivered his policy statement to the Sri Lankan parliament. He said that this economic distress is due to the pandemic and poor economic decisions taken by the previous government. Notably, the previous government has taken external loans in order to assist the nation’s development but it came out as a national burden now.
Sri Lankan President has defended the government’s decisions to ban the import of vehicles and non-essential goods. He said that by implementing such an unpopular ban, the government was able to control the import expenditure in the last two years. However, he avoided making a statement on soaring living costs in nations and the shortage of various essential goods.