The credit line is part of about $4bn in emergency aid provided to India during the height of Sri Lanka’s financial crisis last year.
India has extended a $1bn line of credit for Sri Lanka by one year, a Sri Lankan official said, giving the crisis-hit country a backup infusion of dollars for crucial imports.
The credit line, part of about $4bn in emergency aid provided to India during the height of Sri Lanka’s financial crisis early last year, is set to expire in March.
Following negotiations, the credit line has been extended until March 2024, Sri Lanka’s Deputy Treasury Secretary Priyantha Rathnayake told Reuters news agency on Tuesday.
“There is about $350m left in the credit line that can be used if needed,” he told Reuters.
“However, due to the increased availability of foreign exchange in the market, the demand is not as great as last year.”
The announcement comes as Sri Lanka’s creditor countries prepare for their first meeting later on Tuesday to coordinate the country’s debt restructuring. The focus turned to whether China would attend.
The online meeting will be held within a new framework launched in Washington, DC in April that creditors hope will serve as a model to solve the debt difficulties of middle-income economies.
Japan, which is sponsoring the launch along with India and France, has invited all bilateral creditors, including the largest, China, although Japanese officials have said it is uncertain whether it will participate in the talks.
The reason was not immediately clear, though one of the officials felt Beijing was weighing the merits of joining.
Last month, France, India and Japan unveiled a common platform for talks with bilateral creditors to coordinate debt restructuring in Sri Lanka.
Sri Lanka owes $7.1bn to bilateral creditors, government data shows, with $3bn owed to China, followed by $2.4bn to the Paris Club and $1.6bn to India.
The government also needs to renegotiate more than $12bn in eurobonds it owes to private creditors abroad, and $2.7bn in other commercial loans.
Sri Lanka has started talks to restructure part of its domestic debt and aims to conclude the deal in May.