Sri Lanka seeks $1 billion loan from India

Colombo: Sri Lanka is negotiating a $1 billion loan from India to import goods from the country, Central Bank Governor Ajith Nivard Cabraal said on Wednesday, amid a shortage of almost all commodities .

Cabraal also said Sri Lanka was negotiating another loan from China as part of an attempt to restructure its debt repayments. The amount of the loan has not been decided.

He said Sri Lanka was negotiating a $1 billion facility with India to import goods from the country.

Cabraal said this will also help Sri Lanka in debt repayment and promote more trade with the respective countries.

Last week the President Gotabaya Rajapaksa told visiting Chinese Foreign Minister Wang Yi that Sri Lanka would be helped if the debt could be restructured.

We agreed that they would help us with refunds in this form. It is therefore possible that we have a new loan coming in order to amortize the repayment of our debt to China, Cabraal said.

Cabraal said Sri Lanka’s debt repayments this year would amount to around $6 billion.

We are confident that we can pay them all despite the current difficulties we are facing,” he said, adding that the upcoming $500 million International Sovereign Bond (ISB) repayment will be duly paid.

Last week, the government faced lobbying from chambers of commerce who advocated defaulting on IBS in order to pay for imports.

Sri Lanka is currently experiencing a shortage of almost all basic necessities due to a lack of dollars to pay for imports.

Cabraal defended the Central Bank’s decision to sell more than half of its gold reserves last month to supplement foreign exchange reserves. Central Bank economic indicators as of January 7 showed gold reserves fell to US$175 million in December from US$382 million.

Cabraal said the sale of gold was part of the reserve management adopted by the Central Bank and could be brought to the bank in the future.

Government officials said India’s $1 billion loan would be limited to food imports.

Farmers have warned of food shortages in the country over the next two months.

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