Sri Lanka defaulted on its debt for the first time in its history, as the country battles with its worst financial crisis in more than 70 years.
Sri Lanka has sought a loan from Qatar for oil imports, the Minister of Power and Energy announced on Tuesday, as the country’s central bank crisis further deepens.
Minister Kanchana Wijesekera has met with Qatar’s deputy general of the Qatar Fund for Development to discuss a possible credit line facility for gas and petroleum supply.
A credit line allows individuals to borrow money in increments and repay and borrow again as long as the line remains open.
“Was informed that funds has been allocated for medical supplies and will consider the request for a credit facility and support the IMF program,” Wijesekera said on Twitter on Tuesday.
The South Asian minister also met with Qatar Energy’s CEO and Qatar’s Energy Minister Saad Sherida Al Kaabi to discuss the supply of oil, liquified petroleum gas, and liquified natural gas to his country in a bid to ease the ongoing energy crisis.
In April, Sri Lanka reached out to several countries over requests for bilateral credit as a comprehensive aid package from the International Monetary Fund (IMF) may require about six months.
A bilateral credit entails a situation in which two people or groups agree not to ask for debts to be paid for a particular period of time.
India is providing “every conceivable assistance,” Foreign Minister Gamini Lakshman Peiris told reporters at a briefing in Colombo in April, according to Bloomberg. Sri Lanka is also seeking help from Japan, Oman, and other Gulf Cooperation Council (GCC) countries.
Discussions with the IMF are moving towards a good direction, with Sri Lanka still hopeful of quick aid under an emergency program, Peiris said. However a full package will need about six months to be delivered and “we need to find bridging finance,” he added.
Sri Lanka is eyeing as much as $4 billion worth of emergency aid this year alone to help alleviate hours-long power outages, shorten fuel lines that extend for miles, and pay for imports of lifesaving drugs and food.
In May, the nation of 22 million people fell into default, which is a failure of a government to honour some or all of its debt obligations, for the first time in its history, as a 30-day grace period to raise $78 million of unpaid debt interest payments expired. The government struggles to cease its economic downfall.
The South Asian nation is seeking to “restructure debts of more than $50 billion it owes to foreign creditors, to make it more manageable to repay,” BBC reported.
Sri Lanka is grappling with a crushing economic crisis as tax cuts by President Gotabaya Rajapaksa “drained government coffers” (the money that an organisation has in its bank accounts and available to spend).
The Covid-19 pandemic also took a heavy toll on the country’s tourism sector—a crucial element in the country’s economy—while surging oil prices “emptied foreign exchange reserves.”
Inflation hit 39.1% in May 2022 from 29.8% in April same year.