Business

Fuel credit line from India end of this month

  • 3-year $ 500 m credit line at nominal interest rate
  • Terms yet to be finalised: Attygalle
  • Gammanpila reiterates no fuel shortage

BY Shenal Fernando

The $ 500 million credit line for fuel, which Sri Lanka requested from India some time ago, is expected to be received by the country by the end of this month, amidst an aggravated fuel crisis, The Morning Business learns.

Speaking to us yesterday (21), Treasury and Ministry of Finance Secretary S.R. Attygalle stated that discussions are currently ongoing and that they hope to sort out the credit line from India for fuel by the end of November.

Commenting on the terms of the credit line, he stated: “Discussions are still ongoing and terms are yet to be finalised. It will be a normal three-year credit line for a nominal interest rate.”

Meanwhile, a senior Treasury source recently disclosed to us that discussions relating to the $ 3.6 billion line of credit from Oman for the purchase of fuel was progressing slowly.

Last Monday (15), Minister of Energy Udaya Gammanpila announced the temporary closure of the Sapugaskanda Oil Refinery for a 50-day period, claiming that the importation of refined petrol or diesel instead of importing crude oil and refining it Sri Lanka would be favourable in managing the current foreign exchange crisis of the country.

“We are currently in discussions with several countries to obtain loan facilities. According to the current prices, we need $ 350 million for fuel imports per month. Sri Lanka is currently at a weak position in terms of obtaining loan facilities. Once this foreign exchange crisis is solved, we will import crude oil again,” Gammanpila further noted.

Following the announcement of the temporary closure of the Sapugaskanda Oil Refinery last Monday, there were widespread fears of a fuel shortage, which in turn led to a fuel purchasing frenzy.

Consequently, Gammanpila took steps to reassure the public that there will be no shortage, noting: “The fuel shortage is not real but created using the media. When everyone goes to a petrol shed and starts filling their tanks and cans with petrol, this creates an artificial temporary shortage of fuel. People have used the media to spread this speculation of a fuel shortage.”

Speaking to The Morning Business yesterday, the Minister once again reiterated that there is no fuel shortage in the country and further claimed that they are receiving shipments of fuel once every three days.

Responding to a question by us on how the Government is funding such fuel imports, considering the prevailing foreign exchange crisis, Gammanpila stated: “The Sri Lankan Government’s policy is that when we manage the limited foreign currency which we have or earn during the month, first priority goes to medicine and medical equipment while second priority is given to fuel. While there may be some difficulty in making payments for other products, there will be no such issues for fuel.”

In the absence of a foreign exchange-denominated credit line to fund the country’s fuel imports, questions have arisen as to whether fuel imports will lead to the further depreciation of Sri Lanka’s foreign reserves which had, as per Central Bank data, fallen to $ 1.6 billion by end October from $ 2.1 billion in end September.

However, according to Gammanpila, fuel imports will not impact our foreign reserves, because “Sri Lanka usually earns around $ 1 billion per month through export proceeds and other inflows such as tourism, remittance from expatriate workers, and foreign investments. From such US dollar inflows, first priority will be given to medicine or health-related products and second to fuel”.

Fuel credit line from India end of this month