Sri Lanka will ask India for an additional $500 million loan for petroleum

Sri Lanka has chosen to seek new aid from India in the amount of $500 million in order to increase its fuel imports, as the island continues to suffer from a debilitating economic crisis that has resulted in persistent shortages of essentials.

The crisis-stricken Sri Lanka has run out of cash to pay for imports, causing inhabitants to stand in line for extended periods of time — sometimes all day or night — to pump gasoline or diesel, which are currently in short supply.

The lack of fuel has halted public transportation, harmed businesses, and forced schools to remain closed since children are unable to commute. In recent days, there have been numerous reports on social media in Sri Lanka of families being unable to seek emergency medical care owing to a lack of fuel. The government has instructed “non-essential” employees to work from home in an effort to reduce gasoline use.

Sri Lanka’s cabinet approved a proposal

“The Cabinet of Ministers approved the proposal submitted by the Minister of Electricity and Energy to obtain a series of short-term loan facilities worth an additional $500 million with the assistance of the export-import bank of the Indian government in order to purchase petroleum products required by the country in order to settle the current foreign exchange shortage,” the government said in a statement released after Monday’s Cabinet meeting.

Diesel, which was formerly available for LKR 289 ($0.80) per litre, now costs LKR 400, a 38 percent increase from its previous price. The price of gasoline increased from 338 to 420 Sri Lankan rupees, posing a danger to the already soaring expenses of all basic goods.

Sri Lanka has been experiencing an unparalleled economic crisis for several months, prompting nationwide mass protests. A group of protesters has camped outside the Presidential Secretariat in Colombo for 46 consecutive days, demanding the resignation of President Gotabaya Rajapaksa, whom they hold primarily responsible.

In the midst of an intensifying crisis, the government announced last month that it would default on the country’s $51 billion foreign debt as a “last resort” and is currently negotiating a deal with the International Monetary Fund. However, Central Bank Governor Nandalal Weerasinghe stated on Monday that it was difficult to provide a date for Sri Lanka’s economic recovery, which was dependent on the success of government efforts.

The majority of Colombo’s attempts so far have involved soliciting assistance from bilateral partners and multilateral lenders. India has previously granted credit lines of $700 million for fuel imports — as part of the total $3.5 billion in aid extended since January — and delivered over 5 lakh MT of fuel, including the most recent supply of 40,000 tonnes of gasoline that arrived in Colombo on Monday.

To grow Sri Lanka’s domestic energy sector, the government is evaluating different possibilities, including international investment. Tuesday, Minister of Power and Energy Kanchana Wijesekera revealed plans to auction plots for oil exploration research in the Mannar Basin, where Cairn India was previously engaged in exploration. 

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