Sri Lanka likely to seek $1.5 billion credit from India as Colombo rediscovers time-tested ally

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<img height="1" src="file:///C:/Users/media/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="1" />With the Sri Lankan economy facing a severe crisis over rising debt, Colombo is likely to seek a $1.5 billion line of credit (LoC) from India as early as December.</p>
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The Sri Lankan media reports that Finance Minister Basil Rajapaksa is expected to visit India in early December and meet up with Prime minister Narendra Modi as well as Finance Minister Nirmala Sitharaman and External Affairs minister S Jaishankar.<br />
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With depleted foreign reserves, an Indian LOC worth $1.5 billion could ease the pressure on Colombo's foreign reserves, stabilising it for at least five months. Sri Lankan newspaper The Morning says that this would also enable Colombo to avoid taking a loan from the International Monetary Fund (IMF).<br />
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Sri Lanka is facing an enormous financial downturn due to Covid-19 <a href="https://www.indianarrative.com/world-news/india-sri-lanka-cooperate-on-defence-as-colombo-begins-to-distances-itself-from-china-121060.html">as well as Chinese debts</a>. Its foreign exchange reserves have dwindled to half at $2.8 billion in just one year.<br />
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The two neighbours are focusing on <a href="https://www.indianarrative.com/india-news/india-sri-lanka-to-take-ties-to-the-next-level-with-inauguration-of-kushinagar-airport-122078.html">cementing relations </a>in the fields of travel, tourism, trade and defence. Sri Lanka also allowed Indian ports company Adani Group to build the <a href="https://www.indianarrative.com/economy-news/india-dents-chinese-influence-in-sri-lanka-through-colombo-port-deal-118437.html">Colombo Port's Western Container Terminal</a>.</p>
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India also sent organic nano nitrogen fertiliser to Sri Lanka after a Chinese shipment was found to be contaminated with pathogens and harmful bacteria. The fertiliser from Qingdao company caused <a href="https://www.indianarrative.com/world-news/now-tainted-chinese-company-threatens-sri-lanka-over-contaminated-fertiliser-seeks-damages-126823.html">friction between the two countries</a> as the Chinese government began putting pressure on Sri Lanka to accept the contaminated fertiliser.<br />
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At another level, Sri Lanka and India have seen a number of high-level visits between leaders and officials over the past few months. India is also focusing on the historic, cultural and religious bonds that the neighbours share over hundreds of centuries.<br />
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The two countries also held a number of military drills between the Indian Army and the Sri Lankan army as well as the <a href="https://www.indianarrative.com/world-news/indian-navy-sends-training-mission-to-sri-lanka-to-revive-military-ties-in-south-asia-123614.html">navies of the two countries</a>. Earlier this year, the Indian Air Force had participated in the 70th anniversary celebrations of the Sri Lanka Air Force.</p>
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For Sri Lanka, India still remains one of its biggest trading and tourism partners despite its heavy-dependence on China. </p>