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India extends Sri Lanka's access to its USD 1 billion credit line for another year

Tuesday, India extended its one billion dollar credit line to Sri Lanka for another year in order to assist the island country, which has been severely affected by an unprecedented economic crisis, in purchasing desperately needed food, medicine, and other necessities.

In March of last year, a contract for a USD 1 billion credit facility was inked by the Sri Lankan government and the State Bank of India (SBI). At the height of Sri Lanka's economic crisis, India gave the government a credit line.

“India reaffirms its commitment to the Sri Lankan people. The Indian High Commission in Sri Lanka tweeted that Sri Lanka would be allowed to utilise the USD 1 billion Indian credit facility for one more year to purchase food, medication, and other necessities thanks to the Amendment Agreement signed today in Minister @ShehanSema's presence.

“After the first term, which is until March 2024. The facility, which is a part of India's multifaceted assistance of USD 4 billion offered last year, was extended by India via @TheOfficialSBI in response to a particular request from GOSL, it added.

According to Sri Lanka's needs and priorities, the loan facility has been utilised since last year for the urgent purchase of gasoline, medications, food, and industrial raw materials.

In accordance with its “Neighbourhood First” policy, India provided Sri Lanka with multifaceted assistance totaling roughly USD 4 billion last year, including several loan lines and currency support.

The Indian High Commission said that India's sustained assistance to Sri Lanka is evidence of “our abiding commitment to stand with the government and the people of Sri Lanka towards early economic stabilisation and recovery.”

Due to a significant lack of foreign currency reserves, Sri Lanka had a catastrophic financial crisis in 2022—the worst since it gained independence from Britain in 1948—which sparked political unrest and the overpowering Rajapaksa family's overthrow.
In the meanwhile, Sri Lanka said on Tuesday that it has started the basic work to restart the Light Rail Transit (LRT) project, which was sponsored by Japan.

The request to pick up the project again was accepted by the government. Last week, Wickremesinghe travelled to Japan.

According to minister and cabinet spokesperson Bandula Gunawardena, “President Wickremesinghe went to Japan after creating the background to clear some of the concerns we have due to the abrupt termination of several agreements and proposals.”

The USD 1.5 billion LRT project and the East Container Terminal (ECT) project at Colombo Port were both unilaterally terminated by the previous president, Gotabaya Rajapaksa, in 2021. Along with India and Sri Lanka, Japan committed to provide funding for the LRT project and expressed interest in the ECT project as well.

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