INDIA BUSINESS

India grants $900mn to Lanka to overcome forex crisis
January 15, 2022

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Source: Pixabay

One-liner: The aid will help Sri Lanka build up its depleted foreign reserves and for food imports, amidst a shortage of almost all essential commodities in the island nation.

S1bn loan negotiated: On Wednesday, the governor of the Central Bank Ajith Nivard Cabraal said that the island nation is negotiating a $1bn loan from India to import goods from the country.

Decision conveyed: The Indian High Commissioner to Sri Lanka Gopal Baglay met Cabraal on Thursday and “expressed India's strong support to Sri Lanka in the wake of RBI extending over $900mn  facilities over the last week”.

Loan composition: “These comprise deferment of Asian Clearing Union settlement of over $509mn and currency swap of $400mn," the tweet said.

Doubling of reserves: Commenting on India's gesture, analysts on Colombo said the Indian assistance could have contributed to Sri Lanka's doubling of reserves announced at the end of Dec.

Can fund imports for a month: The central bank said that the reserve position had doubled to $3bn from being down to $1.5bn by Dec or sufficient for just a month's imports.

Cabraal claimed that the forthcoming Indian loan would be for food imports.

Shortage of essentials: Sri Lanka is currently experiencing a shortage of almost all essentials due to a shortage of dollars to pay for the imports.

Power cuts: Additionally, power cuts are imposed at peak hours as the state power entity is unable to obtain fuel to run turbines.

  • The state fuel entity has stopped oil supplies as the electricity board has large unpaid bills. The only refinery was shut as it was unable to pay dollars for crude imports