Sri Lanka currency crisis: Sri Lanka seeks $500 million loan from India to buy fuel amid currency crisis

The Sri Lankan cabinet has approved seeking a $500 million loan from the Exim Bank of India for the purchase of petroleum products amid a severe currency crisis in the island nation.

Sri Lanka has been considering different options to facilitate measures to prevent fuel pumps from running dry, as the country faces a severe foreign exchange crisis to pay for its imports.

The country is in the throes of unprecedented economic turmoil, the worst since its independence from Britain in 1948. It is grappling with a shortage of almost all basic necessities, due to a lack of dollars to pay for imports.

At the Cabinet meeting held on Monday, a proposal was approved to seek a loan from the Indian Exim Bank to purchase fuel, Energy Minister Kanchana Wijesekera said on Tuesday.

“Under the current economic conditions, approval has been given to the proposal of the Minister of Power and Energy to seek a loan of $500 million from the Indian Exim Bank for the purchase of petroleum products “, says a note from the Cabinet.

Sri Lanka had already received 500 million dollars from the Exim

and another 200 million from oil purchases, Wijesekara said. From June, it is estimated that Sri Lanka will need US$530 million for fuel imports in the current currency crisis.

The crisis hit Sri Lanka on Tuesday and also raised the price of petrol by 24.3% and diesel by 38.4%, a record rise in fuel prices amid the country’s worst economic crisis due shortage of foreign exchange reserves.

India on Monday said it had delivered about 40,000 metric tons of gasoline to Sri Lanka, days after providing 40,000 metric tons of diesel under India’s line of credit to help ease the severe fuel shortage. .

India extended an additional $500 million line of credit to Sri Lanka last month to help the neighboring country import fuel as it struggles to pay for imports after its foreign exchange reserves plummeted in recent months. recently, causing a devaluation of its currency and galloping inflation. .

The economic crisis has also triggered a political crisis in Sri Lanka and a demand for the resignation of President Gotabaya Rajapaksa. The crisis has already forced Prime Minister Mahinda Rajapaksa, the president’s older brother, to resign on May 9.

A 40% inflation rate, food, fuel and medicine shortages and power outages led to nationwide protests and a plummeting currency as the government ran out of foreign exchange reserves he needed to pay for imports.

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