Sri Lanka has sought a $500 million credit line from India to pay for its crude oil purchases amid a severe foreign exchange crisis in the island nation.

The move came few days after energy minister Udaya Gammanpila warned that the current availability of fuel in the island nation can be guaranteed only till next January.

The state-run Ceylon Petroleum Corporation (CPC) owes nearly $3.3 billion to the two main government banks —Bank of Ceylon and People’s Bank. The state oil distributors imports crude from the Middle East and refined products from other areas, including Singapore.

“We are currently engaged with the Indian High Commission here to obtain the facility ($500 million credit line) under the India-Sri Lanka economic partnership arrangement,” CPC Chairman Sumith Wijesinghe was quoted as saying by local news website newsfirst.lk.

He said the facility would be utilised for purchasing petrol and diesel requirements.

The energy secretaries of both India and Lanka are expected to sign an agreement for the loan soon, the report quoted Finance Secretary S.R. Attygalle as saying.

The government has put on hold the expected retail price hike of fuel despite the last week’s increase in cooking gas and other essentials.

The price hike in the global oil prices has forced Lanka to spend more on oil imports this year. The country’s oil bill has jumped 41.5 % to $2 billion in the first seven months of this year, compared to last year.

Lanka is facing a severe foreign exchange crisis after the pandemic hit the nation’s earnings from tourism and remittances, Finance Minister Basil Rajapaksa had said last month.

The country’s GDP contracted by a record 3.6% in 2020 and its foreign exchange reserves plunged by over a half in one year through July to just $2.8 billion. This has led to a 9% depreciation of the Sri Lankan rupee against the dollar over the past one year, making imports more expensive.