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India announces another $1 bn line of credit to Sri Lanka as Rajapaksa visits to save economy

India’s fresh helping hand to Sri Lanka is one more indication that New Delhi and Colombo are overcoming the hiccups in their ties in recent years.

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New Delhi: India has announced another $1 billion as credit to Sri Lanka to help shore up the sinking economy of the island nation as Finance Minister (FM) Basil Rajapaksa makes yet another trip to New Delhi — his second in four months.

In an announcement on Twitter Thursday, the Ministry of Finance said: “Agreement was signed between SBI and Government of Sri Lanka for $1 billion credit facility for procurement of food, medicine and other essential items to Sri Lanka.”

The move came after Rajapaksa met Union Finance Minister Nirmala Sitharaman
and External Affairs Minister S. Jaishankar, in New Delhi.

India’s fresh helping hand to its southern neighbour is one more indication that New Delhi and Colombo are overcoming the hiccups in their ties in recent years. Sources also say that India is going out of its way to help Sri Lanka to counter China’s growing influence.

The Sri Lankan FM, who is the brother of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, is on a two-day trip to secure a line of credit from New Delhi as the island nation’s economy is facing huge pressures. 

The Sri Lankan rupee is fast depreciating against the dollar and foreign debt is mounting. The Sri Lankan government’s income has also taken a big hit due to a drop in tourism that has given rise to gas and fuel shortages, leading to massive power cuts. 

New Delhi is providing a financial package to Colombo so that it can meet some of the more immediate needs to help stabilise its domestic economy, sources told ThePrint. The $1 billion line of credit to Colombo will help in keeping their food prices and fuel costs under check, sources said.

Also read: Amid Ukraine war, Chinese foreign minister could soon visit India to discuss LAC standoff

India’s continuing support

On Wednesday, Rajapaksa met PM Modi and briefed him on “initiatives being taken by both countries to increase bilateral economic cooperation, and conveyed his thanks for the support extended by India for the Sri Lankan economy”, said a statement issued by the Ministry of External Affairs (MEA) the same day. 

A statement issued by the Sri Lankan government Wednesday added: “Prime Minister Shri Narendra Modi assured the minister that India would always stand with Sri Lanka, a close friend.”

PM Modi also highlighted to him the advantages of natural farming and India’s own experience in developing related techniques and products, including nano-fertilisers, the Sri Lankan statement added.

In February, New Delhi provided a short-term loan of $500 million to Colombo for the purchase of petroleum products through the Ministry of Energy and the Ceylon Petroleum Corporation on behalf of the Government of Sri Lanka.

Three months before that, in November 2021, India gave 100 tonnes of nano nitrogen liquid fertilisers to Sri Lanka as their government stopped the import of chemical fertilisers.

Sri Lanka has been facing massive food shortages due to the Rajapaksa government’s decision to go into only organic food production thereby banning the use of synthetic or chemical fertilisers.

Basil Rajapaksa, who last visited India in December 2021, is fast emerging as a key point of connection between India and Sri Lanka even as the Rajapaksa government is seen to be once again tilting towards China.

On the current trip, he also met External Affairs Minister S. Jaishankar and Foreign Secretary Harsh Vardhan Shringla.

(Edited by Amit Upadhyaya)

Also read: US & India should ‘indemnify’ economic ties from risks like Ukraine, says Atul Keshap


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