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India extends Sri Lanka’s credit line of USD 1 billion for an additional year

India extends Sri Lanka’s credit line of USD 1 billion

India announced an extension to its $1 billion credit line to Sri Lanka for another year. The credit line was introduced in March 2020 to aid Sri Lanka in the face of an economic crisis, and has been used to provide urgent support for the procurement of essential items including food, medicine, and fuel.

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India extends Sri Lanka’s credit line of USD 1 billion: Key Points

  • In March of the previous year, the State Bank of India (SBI) and the Sri Lankan government signed a $1 billion credit agreement, which was extended by India to assist Sri Lanka during their economic crisis.
  • This one-year extension is part of a wider multi-pronged assistance package, worth $4 billion, which India has provided to Sri Lanka since last year in accordance with its ‘Neighbourhood First’ policy.
  • India hopes its continued support will help Sri Lanka stabilise and recover economically.
  • In 2022, Sri Lanka experienced an unprecedented financial crisis that prompted political turmoil in the country and the ousting of the Rajapaksa family.

Japan-funded Light Rail Transit (LRT) project Resumption

  • Sri Lanka has announced that it is resuming work on the abandoned Japan-funded Light Rail Transit (LRT) project, which former President Gotabaya Rajapaksa cancelled last year.
  • President Ranil Wickremesinghe received cabinet approval to restart the LRT project during a recent visit to Japan.
  • Japan has also shown interest in the ECT project, alongside India and Sri Lanka.
  • The credit facility has been utilized since then for the urgent procurement of crucial supplies, such as fuel, medicine, food, and raw materials for industrial use.
  • Cabinet spokesman and minister Bandula Gunawardena explained that President Wickremesinghe visited Japan to address concerns after several proposals and agreements came to a sudden halt.

The $1.5 billion LRT project and the Colombo Port’s East Container Terminal (ECT) projects were unilaterally cancelled by former President Gotabaya Rajapaksa in 2021. The LRT project was to be funded by Japan, while India and Sri Lanka had also expressed interest in the ECT project.

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