COLOMBO: Sri Lanka has extended a credit line with India by $200 million in order to procure emergency fuel stocks, the country’s power and energy minister said on Monday, May 2, with four shipments due to arrive in May. Colombo was also in talks with New Delhi over extending the credit line by an additional $500 million, minister Kanchana Wijesekera said at a press conference.
Currently, Sri Lanka is struggling with acute food and electricity shortages, forcing the country to seek help from its neighbours.
The recession is attributed to foreign exchange shortages caused by a clampdown on tourism during the coronavirus pandemic. The country is unable to buy sufficient fuel and gas, while the people are being deprived of basic amenities as well.
Sri Lanka’s overall inflation surged to nearly 30% in April from 18.7% recorded in March, as per the official figures, as the island nation grapples with its worst economic crisis in decades.
Sri Lanka is in the grip of an unprecedented economic turmoil since its independence from Britain in 1948. The crisis is caused in part by a lack of foreign currency, which has meant that the country cannot afford to pay for imports of staple foods and fuel, leading to acute shortages and very high prices.
Months of lengthy blackouts and acute shortages of food, fuel and pharmaceuticals have triggered widespread protests calling for the government’s resignation.
According to the data published by the government’s Census and Statistics Office, the overall inflation hit 29.8% in April from 18.7% recorded in March. The food inflation increased from 30.21% in March to 46.6% in April. Most food items have recorded price increases.
The government’s decision to float the rupee in March after it ran out of dollars to defend a peg has depreciated the currency by over 60%. This has had a spiraling effect on all prices of essentials.
Sri Lanka needs at least $4 billion to tide over its mounting economic woes, and talks with international institutions such as the World Bank as well as countries like China and Japan for financial assistance have been going on.
The country has run out of foreign currency to import badly-needed essential goods.