New Delhi: Sri Lanka signed a $500 million credit line with India to import fuel on Wednesday, officers said, because the island nation seeks to stave off rolling power cuts amid a foreign exchange crisis that has hampered purchases of diesel for power plant life.
The Export-Import Bank of India (EXIM) will offer the credit score line for purchasing petroleum merchandise, Indias High Commission in Sri Lankas fundamental city Colombo said on Twitter.
Sri Lanka is suffering from its worst financial crisis in years with reserves hitting $3.1 billion in December. The united states of America have to repay approximately $four billion in debt repayments this 12 months.
Rising global oil costs have worsened Sri Lanka`s financial problems with spending on oil imports hiking to approximately $500 million in step with month. Sri Lanka and India started out negotiations over the credit line to import fuel in August.
Sri Lanka pays LIBOR+1.25% for the credit line, which will have a one-12 months tenor, and maybe in the end renewed, Energy Minister Udaya Gammanpila advised Reuters.
The government hopes to kick off 565,000 metric tonnes of imports from the primary week of March and expects six petrol shipments and ten diesel shipments, he said.
“Given the seriousness of Sri Lanka`s reserve scenario this credit score line will help but it is handiest increasing our indebtedness and not solving any problems,” said financial analyst Murtaza Jafferjee of J.B. Securities.
Sri Lanka is likewise in talks with Pakistan for a $2 hundred million credit line to buy rice, cement, and medicines, Trade Minister Bandula Gunawardena told Reuters.
“We have also started talks with Australia for any other $200 million credit line to buy grains and other staples,” he said. “The government`s precedence is to maintain reserves to pay off our debt but also ensure there are not any shortages of products for residents.”