Sri Lanka is reportedly negotiating with India to extend the USD 1 billion credit line by a few months.
The credit line is to due to expire on the 17th of March with Sri Lanka having used only about two-thirds of it, mainly for medicines and food.
The Reuters News Agency quoting sources reported that negotiations are underway as Sri Lanka tries to line up funds for the rest of the year while the International Monetary Fund looks set to approve a USD 2.9 billion loan for it shortly.
The extension talks come as data suggest that the economy is recovering and the forex reserves have increased in the past few months.
The Reuters report said the government wants to extend the credit line by 6-12 months because there was about USD 300 million of it left unused.
No agreement had been reached thus far.
The Central Bank of Sri Lanka meanwhile earlier said the country’s official reserves had risen 4.5% to USD 2.22 billion in February from a month earlier.
Yesterday, President Ranil Wickremesinghe in Parliament said there are signs the economy was improving but there was still insufficient foreign currency for all imports, making the IMF deal crucial so other creditors could also start releasing funds.
The President announced that China, Sri Lanka’s biggest lender, extended support for the IMF programme on Monday, clearing the way for the loan.
The IMF said its board would meet on the 20th of March to review a preliminary staff-level agreement first signed with Sri Lanka in September.
It said Sri Lanka had secured financing assurances from all major bilateral creditors.