In the midst of a severe foreign exchange crisis, the Sri Lankan Cabinet has accepted a 500 million dollar loan from the Exim Bank of India for the purchase of petroleum supplies.
As the government grapples with a serious foreign exchange crisis, Sri Lanka has been considering several possibilities to facilitate efforts to prevent fuel pumps from running dry.
The country is experiencing extraordinary economic hardship, the worst since its 1948 independence from the United Kingdom. Due to a lack of cash to pay for imports, it is experiencing a shortage of practically all necessities.
Energy Minister Kanchana Wijesekera said on Tuesday that a proposal to seek an Indian Exim Bank loan to purchase petroleum was authorised during the Cabinet meeting on Monday.
According to a Cabinet note, the proposal by the power and energy minister to seek a 500 million dollar loan from the Indian Exim Bank for the purchase of petroleum goods was approved under the current economic conditions.
According to Wijesekara, Sri Lanka had already received $500 million from the Exim Bank of India and $200 million from the State Bank of India for oil purchases.
In the current forex crisis, Sri Lanka is expected to require 530 million US dollars for fuel imports starting in June.
Sri Lanka raised the price of gasoline by 24.3% and diesel by 38.4% on Tuesday, a record increase in fuel costs amidst the country’s greatest economic crisis due to a lack of foreign exchange reserves.
India announced on Monday that it had provided around 40,000 metric tonnes of petrol to Sri Lanka, just days after sending 40,000 metric tonnes of diesel under the Indian credit line to help alleviate the acute fuel shortfall.
Last month, India offered an additional $500 million credit line to Sri Lanka to help the neighbouring country acquire fuel after its foreign exchange reserves plunged drastically in recent months, prompting a depreciation of its currency and spiralling inflation.
The economic crisis has sparked a political crisis in Sri Lanka, with demands for President Gotabaya Rajapaksa’s resignation. The situation has already prompted President Mahinda Rajapaksa’s elder brother, Prime Minister Mahinda Rajapaksa, to quit on May 9.
Inflation approaching 40%, food, gasoline, and medical shortages, and continuous power outages have sparked widespread protests and sent the currency plummeting, leaving the government short of foreign currency reserves to pay for imports.