Saturday, October 1, 2022

Sri Lanka wants India to supply fertilisers in exchange for a $2.5 billion payment delay

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People familiar with the subject said on Wednesday that Sri Lanka has asked India for fertilisers and a postponement of a $2.5 billion payment to the Asian Clearing Union as part of its efforts to deal with the island nation’s worst economic crisis in decades.

At the same time, $200 million has been set aside from India’s $1 billion line of credit issued in March to pay fuel purchases, according to the sources.

This will be in addition to India’s $500 million line of credit for petroleum imports approved in February.

With Sri Lanka returning to chemical fertilisers, there is an increasing demand for the item, which is being exacerbated by a global scarcity caused by the Ukraine crisis. The Sri Lankan side has requested the supply of fertilisers in this regard, according to the sources.

Chemical fertilisers were outlawed in Sri Lanka last year as part of a planned transition to organic agriculture. The abrupt nature of the move, as well as a scarcity of organic fertilisers, had a negative impact on agricultural output, particularly rice and tea, and the government subsequently lifted the ban on numerous major crops.

The Sri Lankan side has also asked India to postpone payment of $2.5 billion to the Asian Clearing Union (ACU), which includes Bangladesh, Bhutan, India, Iran, the Maldives, Myanmar, Nepal, Pakistan, and Sri Lanka and has its headquarters in Tehran.

At Sri Lanka’s request, India withheld payment of $515 million to the ACU earlier this year. Under the Saarc programme, it had also offered a $400 million currency swap.

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