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Sri Lanka seeks another $1.5 bn loan from India

IFM_Sri Lankan Economic crisis-image
Food prices are skyrocketing as the country is forced to ration its fuel and food supplies.

The central bank of Sri Lanka is seeking an extension of its credit line by another $1.5 billion from neighbour India to deal with its worst economic crisis. India had already given the emerald island $1 billion in loans since the crisis surfaced after SL Finance Minister Basil Rajapaksa visited New Delhi.

The funds are essential for importing essential supplies like food, medicine, and petroleum products as the country is facing a peak shortage of foreign currency which in turn has led to the devaluation of the Sri Lankan rupee.

Food prices are higher than ever before and the country is counting on a bailout from the International Monetary Funding to get back to its feet.

The situation is so bad that the country has been forced to ration its food and fuel supplies, exams have been cancelled due to a shortage of ink and paper. The country’s national petroleum corporation has said that there is no diesel for public distribution for at least two days, according to an AFP report.

Faced with the double trouble of shortage of power from hydroelectric stations, the country is facing 10-hour long power cuts to deal with the oil shortage which fuels the country’s conventional power generation facilities.

The medical care setup has also been deeply impacted by routine and non-emergency surgeries put on hold indefinitely.

The handout by India is significant in light of growing China’s influence in Sri Lankan affairs. Sri Lanka had sought financial help from China too including a debt restructuring arrangement. The crisis has been triggered by fiscal mismanagement in the form of high government spending and inadequate taxation. Two years of the COVID-19 pandemic also gave a death blow to the nation as tourism, one of the backbones of the country’s economy, could not function.

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