Due to some ill-considered decisions taken by our neighboring country Sri Lanka, the country is now gripped by an economic crisis and a food crisis.
Sri Lanka’s revenue fell sharply as the tourism sector was hit by the covid-19 pandemic. As a result, the country’s foreign exchange reserves are declining day by day. With this, Sri Lanka and India sought help as they did not even have the money to import oil and essential commodities.
Sri Lanka has approached our country to lend $ 500 million for emergency oil purchases.
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After two weeks of negotiations on the issue, India is ready to lend $ 500 million to the country. Official sources state that an official agreement has also been signed stating “This $ 500 million was given to Sri Lanka to buy petroleum products from Indian suppliers,” an official said.
According to official sources, the Line of Credit is for a year and has a “nominal” interest rate of less than 2%. Sri Lanka’s government is anticipated to issue a request for proposals from Indian vendors soon in order to finalize the import. Sri Lanka’s ability to import petroleum has been significantly hampered by the country’s ongoing dollar issue, resulting in frequent claims of shortages and power outages.
Also, talks are underway on another $ 1 billion credit line for essential food and drug imports from India, an Indian diplomat said.
Prices of essential commodities such as pulses, sugar, and wheat flour have skyrocketed in the country as foreign exchange reserves have plummeted. The unemployment rate is also rising sharply as the current cuts in that country are even greater.
Food inflation in the country hit a record high of 25 percent last month. The country has also closed foreign embassies to save money. Some countries are even reluctant to lend to Sri Lanka as three international rating agencies have downgraded their credit ratings since the end of last year. Also, more debts will have to be made to repay the loans taken from China.
Authorities have sorted loans from China to pay the existing debts to the dragon country. Lanka has borrowed a heap of money from China for infrastructure and development purposes which it is now struggling to pay back.
