Colombo: Sri Lanka is set to finalise another credit facility with India for food, medicine and other essential items which would help the island nation facing the worst economic crisis in decades, official sources here said on Wednesday.

Sri Lanka is currently reeling under a severe foreign exchange crisis with falling reserves. The country is also grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports.

According to the official sources here, another credit facility from India for food, medicine and other essential items is being finalised between the two governments.

On February 2, Sri Lanka formally signed an agreement with India for a USD 500 million credit line, which would help fund fuel purchases at a time when the country is facing its worst financial and energy crisis in decades.

Necessary measures to operationalise the USD 500 million credit line from the Government of India for the purchase of petroleum products are underway in accordance with the understanding between the Government of India and the Government of Sri Lanka, the sources said on Wednesday.

The power generation in Sri Lanka has been hit by the foreign exchange crisis as fuel to operate thermal power plants are in short supply. The power regulators have warned of five to six hours a day of rolling power cuts over the next few days.

In January, the Indian High Commission here said that External Affairs Minister S Jaishankar agreed to offer critical support and a USD 500 million credit line in a letter to his Sri Lankan counterpart GL Peiris.

The credit line, which was under negotiations since August 2021, would ease pressure on the country’s dwindling reserves that had dipped to USD3.1 billion by December 2021, according to the Central Bank’s estimates.

In January, India announced a USD 900 million loan to Sri Lanka to build up its depleted foreign reserves and for food imports, amid a shortage of almost all essential commodities in the country.

In January, India had also granted Sri Lanka a USD 400 million swap arrangement to boost its reserves.

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