Sri Lankan finance minister to visit India today hoping to seal $1 bn LoC

Amid the worsening economic situation in his country, Sri Lankan Finance Minister Basil Rajapaksa will begin his India visit on Tuesday, hoping to seal a USD 1 billion line of credit (LoC).

External Affairs Minister S Jaishankar earlier in January held a virtual meeting with Basil where the two ministers reviewed the progress in extending the Indian credit facility of USD 1 billion for importing food, essential items and medicine.

As Sri Lanka faces a severe economic crisis, India has continued to assist its neighbouring country in its fight against the COVID-19 pandemic, and to mitigate its adverse impact and its developmental priorities.

India provided more than USD 500 million in foreign currency swaps to strengthen Sri Lanka's foreign reserves, taking the total up to USD 900 million. India also extended the repayment time frame for the USD 500 million debt of Sri Lanka under the Asian Clearance Arbitration.

This crucial visit of Basil Rajapaksa comes ahead of Sri Lanka's talks with the International Monetary Fund (IMF) on a plan for aid for the crisis-ridden country.

The talks, which are slated to take place in mid-April, are likely to include assistance with debt restructuring and managing its foreign exchange shortage.

Reports said that Sri Lankan FM will travel to the US next month to present the country's proposal to IMF officials.

The Daily Mirror reported that the island nation must repay about USD 4 billion in foreign debt this year.

The decision to engage with the international lender comes following months of resistance from the government despite calls from Opposition leaders and experts for a recovery plan.

Moreover, Sri Lanka's forex reserves have depleted to 2.3 billion US dollars by February 2022.