Sri Lankan FM to visit India to formalise economic relief package

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

February 15, 2022 04:58 pm | Updated 07:24 pm IST - Colombo

Sri Lankan Minister for Economic Development Basil Rajapaksa. File

Sri Lankan Minister for Economic Development Basil Rajapaksa. File | Photo Credit: Meera Srinivasan

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.

This will be Mr. Rajapaksa's second visit to New Delhi in two months.

In January, India announced a $ 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.

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

Basil Rajapaksa, the younger brother of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, during his visit to New Delhi in December, briefed the Indian side on the economic situation in Sri Lanka and his government's approach in addressing the challenges.

During his visit, discussions took place on deepening cooperation in areas of food and health security, energy security, the balance of payment issues and Indian investments in Sri Lanka among others.

External Affairs Minister S. Jaishankar also held a virtual meeting with Finance Minister Basil Rajapaksa on January 15 and discussed projects and investment plans by India that would strengthen the economy of the island nation.

Foreign Minister Mr. Peiris said that India’s intervention in Sri Lanka’s economic woes was much positive and significant.

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

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

However, no schedule was announced for his visit.

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 $ 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 $ 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 $ 400 million to improve the depleted foreign reserves, deferred Asian Currency Union settlement of $ 515 million by $ 2 million along with another Indian credit line of $ 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.

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