The RBI on Thursday issued a notification to operationalise the USD 500-million line of credit provided by India to Sri Lanka, which is facing the worst economic crisis in decades due to the pandemic, to buy petroleum products. Export-Import Bank of India (Exim Bank) entered into a pact on February 2, 2022, with Sri Lanka to provide the USD 500-million line of credit for financing purchase of petroleum products.

Out of the total credit by Exim Bank, goods, works and services of value of at least 75 per cent should be supplied by the seller from India, the RBI said in a notification.

The remaining 25 per cent of goods and services may be procured by seller from outside India.

The agreement under the LoC (line of credit) is effective from February 18, 2022.

Under the LoC, the terminal utilisation period is six months from the date of signing of LoC agreement or other extended date agreed at the request of borrower.

However, the extended date should not be beyond 12 months from the date of the agreement, the RBI said.

Sri Lanka is currently reeling under a severe foreign exchange crisis with falling reserves. The country is also grappling with a shortage of almost all essentials due to the lack of dollars to pay for the imports.

Necessary measures to operationalise the USD 500-million credit line from India for the purchase of petroleum products are underway in accordance with the understanding between the two governments.

Sri Lanka’s power generation has been hit by the foreign exchange crisis as the fuel for operating thermal power plants is in short supply. The power regulators have warned of five-six hours a day of rolling power cuts over the next few days.

Additionally, the island nation is set to finalise another credit facility with India for food, medicine and other essential items which would help in facing the crisis, according to sources.

In a separate notification, the RBI said India has provided USD 7.29-million line of credit to Guyana through Exim Bank to a finance solar home lighting project.

An agreement between Exim Bank and Guyana was inked on September 29, 2021.

The USD 7.29-million loan will be used for procuring and installing 30,000 solar home lighting systems in the hinterland communities in Guyana.

The agreement under the LoC is effective from February 14, 2022, the RBI said. Under the LoC, the terminal utilisation period is 60 months from the scheduled completion date of the project.