In a recent Reuters news report, it was revealed that India has extended its $1 billion credit line for Sri Lanka for another year. This move provides a backup fund for the crisis-hit country to pay for essential imports.
According to Treasury Secretary Priyantha Rathnayake, the credit line was extended until March 2024 following negotiations. Although there is still approximately $350 million left of the credit line, the increase of foreign exchange availability in the market has lessened the need for it compared to last year.
Sri Lanka’s reserves hit record lows in April 2020, which caused its worst financial crisis since gaining independence from British colonial rule in 1948. However, increased foreign inflows through workers’ remittances and tourism, as well as the $3 billion International Monetary Fund program, have helped Sri Lanka rebuild its reserves to some extent.
As of the end of April 2023, Sri Lanka’s foreign reserves totaled $2.75 billion, including a $1.4 billion equivalence of Chinese Yuan-denominated swap facility from the People’s Bank of China obtained two years ago, which has conditions on its usability.