Sri Lankan FM to visit India to formalise economic relief package

 Colombo: Sri Lanka’s Finance Minister Basil Rajapaksa will visit India in a fortnight to formalise India’s economic relief package for the island nation facing a serious forex crisis, Foreign Minister G L Peiris said on Tuesday.

In January, India announced a USD 900 million loan to Sri Lanka to build up its depleted foreign reserves and for food imports, amid a shortage of almost all essential commodities in the country.

Peiris told reporters here that Rajapaksa’s visit to India in December “brought in many fruitful outcomes as we received USD 2.4 billion assistance from India as a result”.

India’s intervention in Sri Lanka’s economic woes was much positive and significant, he said.

“The close integration of our economy with India would be very beneficial, one third of our tourist arrivals are from India,” the minister said.

Rajapaksa’s next visit would be important for Sri Lanka to clinch the USD 1 billion credit line meant for importing food and medicine, the foreign minister said.

India’s economic relief package for Sri Lanka, announced in January, provided a lifeline to the island nation which was facing food shortages as the foreign reserves dropped to unprecedented levels, affecting the power supply and availability of fuel.

Earlier this month, an agreement to grant Sri Lanka a credit line of USD 500 million for fuel purchases was sealed which was part of the immediate economic relief package.

Later, the Cabinet approved the move to purchase 40,000 metric tonnes of diesel and petrol each from the Indian Oil Corporation which the officials said was outside of this USD 500 million credit line.

The Lanka IOC, the Sri Lankan subsidiary of India’s oil major Indian Oil Corporation (IOC), has been in operation in Sri Lanka since 2002.

India’s economic assistance package in January included a currency swap of USD 400 million to improve the depleted foreign reserves, deferred Asian Currency Union settlement of USD 515 million by USD 2 million along with another Indian credit line of USD 1.5 billion to ease shortages of essentials with imports from India.

The state fuel entity Ceylon Petroleum Corporation said the 40,000 metric tonnes of diesel purchased from the Indian Oil Company was due. The IOC has allowed 60 days credit for the purchase, officials said.

The state energy entity Ceylon Electricity Board said a formal decision on power cuts extending through this month to April would be announced on Tuesday.

The hydro-electric capacity had halved due to a drop in the water levels in the reservoirs.