Neighborhood first: India extends $1 billion line of credit to Sri Lanka

New Delhi, Mar 18: In line with "Neighbourhood First", India on Thursday extended a $1 billion credit facility to Sri Lanka which is suffering a severe economic crisis triggered by a shortage of foreign exchange. The “short term concessional loan facility” will be provided by State Bank of India, under an agreement signed between the two governments on Thursday during the visit of Sri Lankan Finance Minister Basil Rajapaksa.

 

 

 

Finance Minister Nirmala Sitharaman and External Affairs Minister S Jaishankar were present at the signing. “Neighborhood first. India stands with Sri Lanka. US$ 1 billion credit line signed for supply of essential commodities. Key element of the package of support extended by India,” Jaishankar tweeted.

 

 

 

With this, Delhi has provided a total financial assistance of $2.4 billion to Sri Lanka since January, but this will only partially help mitigate the country’s economic meltdown.

 

A media release from the Sri Lankan High Commission in Delhi said the two sides have agreed to set up a framework for “short, medium and long-term economic cooperation between the two countries, aimed at addressing Sri Lanka’s present economic challenges”. According to the statement, the three ministers — Rajapaksa, Sitharaman and Jaishankar — have “agreed to stay in regular contact and a co-ordinating mechanism consisting of senior officials from the two countries was set up to maintain a regular dialogue”.

 

 

On the other hand, Jaishankar will travel to Colombo later this month for the BIMSTEC ministerial meeting, and the bilateral “conversation can continue there” said an official. Along with India’s emergency financial assistance, Delhi has also conveyed to Colombo that Indian investments in renewable energy, ports, logistics, infrastructure and connectivity will help Sri Lanka build capacity “holistically”, repairing its economy.

 

India has also answered on this matter in Rajya Sabha. MoS External Affairs Minister V Muraleedharan in a written reply said, "In line with India’s ‘Neighbourhood First’ policy and our close bilateral ties with Sri Lanka, India remains committed to assist Sri Lanka in its post Covid economic recovery, based on the requirements and priorities of the Government of Sri Lanka. In view of the above, India extended a new Line of Credit of USD 500 million to Government of Sri Lanka for importing fuel from India. In addition, both sides are in consultation for extension of a credit facility of USD 1 billion to Sri Lanka for importing food, essential items and medicine.