PM Modi Promises Full Cooperation to ‘Close Neighbour’ Sri Lanka Amid Worsening Foreign-exchange Shortage

Sri Lankan Finance Minister Basil Rajapaksa on Friday said that Prime Minister Narendra Modi has assured Colombo of full cooperation in all economic and social matters, including backing at international forums, to further intensify the close bilateral ties. Speaking to reporters after he returned from India, where he clinched a USD 1 billion line of credit to Sri Lanka to help it tackle its ongoing economic crisis, Rajapaksa said Sri Lanka enjoys very close ties with India.

“As our closest neighbour, we enjoy a very close relationship with India. Prime Minister Modi this time said India would back Sri Lanka in all matters of economic and social including backing at international forums,” he said. Sri Lanka’s worsening foreign-exchange shortage has seriously impacted the energy sector, which depends entirely on imports for its oil needs. The fuel shortage has led to long queues at understocked pumps across the island nation.

During Finance Minister Rajapaksa’s trip to Delhi, India announced a USD 1 billion line of credit to Sri Lanka as part of its financial assistance to help it deal with its economic crisis. After an agreement to extend the line of credit was inked, Ministry of External Affairs (MEA) Spokesperson Arindam Bagchi said India has always stood with the people of Sri Lanka and will continue to extend all possible support to the country.

Rajapaksa said there are no special conditions for the line of credit. There are no special conditions the repayment will be in three years, Rajapaksa said when asked about the USD 1 billion line of credit. He said the local importers are now free to import goods from India under the loan facility with the local trade ministry employing a transparent process to facilitate importers.

The Indian line of credit came a month after Sri Lanka purchased 40,000 metric tonnes of diesel and petrol from India’s oil major Indian Oil Corporation to meet the urgent energy requirements in the economic crisis worsened by depleted foreign reserves. Currently the island nation’s situation is such that long queues prevail for fuel, gas and other essentials as shipments dried due to forex shortages.

Power cuts were imposed due to scarcity of fuel to run thermal power plants. Sri Lanka was ignoring the experts’ advice to go for an International Monetary Fund (IMF) bail out and instead opted to tap India for assistance.

However, earlier this week President Gotabaya Rajapaksa in an address to the nation this week announced a policy shift and agreed to work with the IMF to figure out a solution to its economic crisis.

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