Colombo, March 27: Sri Lanka would seek a new temporary credit facility of USD 1 billion from India to purchase essential items including food and medicine, the official media here reported on Monday.

Sri Lanka received 333 million dollars, the first tranche of the USD 3 billion International Monetary Fund (IMF) bailout programme last week to overcome its economic crisis and catalyse financial support from other development partners. Sri Lanka Economic Crisis: Protestors Storm Presidential Palace in Colombo; Take a Swim in Pool and Explore the Kitchen (Watch Video).

The Sri Lankan finance ministry officials held talks with its Indian counterparts to obtain the new temporary USD 1 billion facility for the "purchase of essential foodstuff, medicines and other goods for the country," the state-run Daily News newspaper reported. Sri Lanka Economic Crisis: UN To Provide $48 Million Humanitarian Assistance.

Meanwhile, former Central Bank Governor Dr Indrajith Coomaraswamy, speaking at a discussion organised by the Centre for Banking Studies of the Central Bank, said, “… the negotiations are also underway to secure an Indian rupee swap from RBI. The amount is still uncertain; it could be up to the equivalent of USD 1 billion. That is still being worked out."

"This is expected to facilitate Sri Lanka-India trade,” the senior economist was quoted as saying by the Daily Mirror newspaper on Saturday. Coomaraswamy added that the Sri Lankan government also began talks with Indian authorities to extend the repayment of the USD 1 billion credit line received last year and debt under the Asian Clearing Union by five years, the report said.

“… we are trying to settle that money over a five-year period. It is still at early levels of negotiations,” he said, noting that the island nation was unlikely to receive such a long extension for the USD 400 million multi-currency swap facility, which has already been extended.

Last week, state minister of finance, Ranjith Siyambalapitiya said that Sri Lanka settled a loan instalment of USD 121 million from the previous facilities extended by India, using the first tranche of the IMF bailout package. Sri Lanka has been struck by a catastrophic economic and humanitarian crisis sparked by years of mismanagement and the raging pandemic.

India has extended lines of credit worth over USD 4 billion to Sri Lanka in diverse sectors, including the supply of essential items, petroleum, fertilisers, development of railways, infrastructure, defence sector and renewable energy, according to the Indian High Commission here.

The Indian Oil Company's local operation kept fuel supplies going in the face of miles-long queues forming at retail fuel stations mid-last year, as the state ran dry of forex to import petroleum.

The IMF's Executive Board approved a 48-month extended arrangement under its Extended Fund Facility (EFF) last week with an amount of SDR 2.286 billion (about USD 3 billion).

The IMF bailout, the seventeenth in Sri Lanka's history, was approved following prolonged discussions held up over Colombo's unsustainable debt. India was the first bilateral lender to issue financing assurances in the debt restructuring negotiations.

President Ranil Wickremesinghe, who spearheaded the IMF negotiations, specially mentioned the contributions made by the Indian finance minister Nirmala Sitharaman to assist his government.

India has extended multi-pronged assistance to Sri Lanka during the peak of its economic and humanitarian crisis in line with its "Neighbourhood First" policy and as an earnest friend and partner of Colombo.

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