Colombo/IBNS: Sri Lanka plans to request a new short-term credit facility worth USD 1 billion from India in order to buy essential commodities such as food and medicine, according to official media reports on Monday.

Last week, Sri Lanka obtained the initial installment of 333 million dollars from the International Monetary Fund (IMF) bailout program, which is worth a total of USD 3 billion.

The purpose of the bailout is to help the country address its economic difficulties and encourage other development partners to provide financial assistance.

A nation with a population of 22 million is facing difficulties in financing crucial imports due to a significant reduction of 70% in their foreign exchange reserves over a span of two years, resulting in a devaluation of their currency and attempts to solicit assistance from international financial institutions.

As Sri Lanka's government gears up for discussions with the International Monetary Fund regarding the country's capacity to repay foreign debts, there are apprehensions due to fuel scarcity, a surge in food prices, and the emergence of protests.

Earlier this month during Sri Lankan Finance Minister Basil Rajapaksa's visit to New Delhi, India provided $1 billion in aid to assist with vital imports, in addition to the newly proposed line of support.

According to the Lankan government-owned Daily News publication, "The Sri Lankan finance ministry officials held talks with its Indian counterparts to obtain the new temporary USD 1 billion facilities for the "purchase of essential foodstuff, medicines and other goods for the country."

Dr. Indrajith Coomaraswamy, the ex-Governor of the Central Bank, made remarks during a seminar arranged by the Centre for Banking Studies, stating, "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."

As per the Indian High Commission, India has offered more than USD 4 billion in credit lines to Sri Lanka spanning various sectors such as the provision of critical goods, petroleum, fertilizers, the enhancement of railways and infrastructure, defence and renewable energy.

Amid the country's foreign exchange reserves shortage, Indian Oil Company's local operation stepped in to ensure a steady supply of fuel to retail stations, as lengthy queues formed last year.

Following extended negotiations related to Sri Lanka's unmanageable debt, the International Monetary Fund's Executive Board granted approval for an extended arrangement under its Extended Fund Facility (EFF), providing a sum of SDR 2.286 billion (approximately USD 3 billion).

This marks the seventeenth instance of Sri Lanka receiving an IMF bailout.