On February 2, 2022, the Export Import Bank (EXIM) of India and Government of Sri Lanka signed a USD 500- million Line of Credit agreement.

Key Facts

• The loan agreement is aimed at helping Sri Lanka cope with its current fuel shortages, amid worst economic crisis in the island nation.
• India’s support for fuel imports by Sri Lanka, through the Line of Credit, is in light of Sri Lanka’s “urgent requirement”.
• Following the agreement, the Sri Lankan government is likely to invite bids from Indian suppliers soon to finalise its import.

Line of Credit

The Line of Credit spans over a year, at a nominal interest rate of under 2%.

Situation in Sri Lanka

Sri Lanka’s ability to import fuel has been severely affected because of dollar crisis in Sri Lanka. It has further led to frequent reports of shortages and power failures.