Colombo [Sri Lanka]: Due to a severe shortage in oil, gas, medicines, and food items because of a shortage of forex, Sri Lanka was under huge economic crisis, however, India’s timely help rescued the emerald island.
According to reliable sources, India in the last six months has provided assistance on several fronts to its tiny neighbour to tide over its economic crisis.
India is further expected to extend a food and health security package to Sri Lanka on an urgent basis, along with an energy security package and currency swap, and also push Indian investments.
The food and health security package would envisage the extension of a line of credit to cover the import of food, medicines and other essential items from India.
It is said the energy package would also comprise a line of credit to cover the import of fuel from India and an early modernisation of the Trincomalee Oil Tank Farm.
The financial duress was due to a number of reasons including government policies that included unsolicited, attractive tax concession to income taxpayers. The consequence of this extraordinary money growth was the build-up of inflationary pressure in the domestic economy on one side, and the depletion of foreign reserves putting pressure on the rupee to depreciate in the market, on the other.
The rest of the crisis was due to the massive drop in tourism-related earnings owning to COVID-19. The result of all this was that 500,000 people according to the World Bank have fallen below the poverty line, whilst food inflation hit 21 per cent.
Moreover, oil-dependent Sri Lanka’s problems got further aggravated with oil prices surging despite new measures by the US and EU aimed at calming markets troubled by the invasion of Ukraine.
According to published data, Lanka’s oil bill in 2021 had increased by 50 per cent, compared with the last year, reported Daily FT.
The Indian assistance at this time, is timely and impactful on several fronts. Sri Lanka would certainly need more assistance from them to ride over 2022.