Sri Lanka has been importing oil for several months without letters of credit (L/Cs) after banks stopped providing them last year according to the chairman of state-run Ceylon Petroleum Corporation (CPC).

Sumith Wijesinghe says CPC has been able to rely on good relations with its traditional suppliers, some of which have provided credit to enable Sri Lanka to continue importing oil despite the island state's deep economic recession and severe foreign exchange shortage.

L/C woes

Foreign suppliers started asking for L/Cs to be countersigned from around late 2020, and in 2021 most stopped endorsing them. Sri Lanka's banks have not been able to honour L/Cs since mid-2021.

Indian banks were countersigning for a time after most banks had withdrawn completely from the Sri Lankan L/C market.

Indian credit line

Earlier this year, an Indian Oil Corporation (IOC) executive reportedly said the company would supply fuel under a US$500 million line of credit extended by the Indian government to Sri Lanka for fuel purchases.

India has also established a US$200 million line of credit for Sri Lanka's State Pharmaceuticals Corporation under which Indian suppliers will have the opportunity to open L/Cs for certain items.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.