India to aid Sri Lanka with $1 bn credit line as country battles severe economic strife

Amidst a deteriorating ecomic condition and growing political strife, Sri Lanka on March 17 signed a $1 billion credit line with India for procurement of food, medicines and or essential items. Sri Lanka remains embroiled in ecomic crises after country's foreign exchange reserves hit an all-time low coupled with rising foreign debt.

On Thursday,  Government of Sri Lanka signed agreement with State bank of India during Sri Lankan Finance Minister Basil Rajapaksha's two-day visit to India. While Sri Lanka had entered into similar low-interest, loan agreements with China, country is reportedly being pushed into a debt trap. At this critical juncture, Sri Lanka has urged India for help and India has come to rescue of its neighbour. 

New Delhi has agreed to several ecomic arrangements with Colombo including: 

1. A $1 billion (over Rs 7,593.31 crore) line of credit
2. A currency swap arrangement of $400 million (over Rs 3,037.32 crore), and
3. A debt deferral of $515 million (Rs 3,911.25 crore) for two months 

Credit line to help Sri Lanka tackle ecomic woes

Apart from bolstering India-Sri Lanka ties, $1 billion credit line will help Colombo mitigate dams caused by an unprecedented post-COVID ecomic crisis.  amount would help island nation with purchase of essential supplies like food items, pharmaceutical products and oil for Sri Lankan nationals, who are facing severe ecomic hardships after fall in country's foreign exchange reserves swballed into shorts of essential items like fuel, cooking gas, medicine, and milk-powder.  

Additionally, Indian private sector has also shown interest in investing in sectors like hospitality, food processing, cement as well as pharmaceutical production. In  wake of crises, Sri Lanka has also invited Indian Prime Minister Narendra Modi at BIMSTEC Summit in Colombo at end of this month to eng in bilateral talks. 

Sri Lankan authorities, on issue of Tamil reconciliation, have also agreed with Indian stand on devolution of powers to rth and eastern part of country. President's council in Sri Lanka has asked a committee of experts to submit a report with two months after arriving upon a consensus with Sinhalese majority.