By Uditha Jayasinghe

COLOMBO (Reuters). Sri Lanka is seeking an Indian credit line for $1 billion in additional financing to purchase essentials, according to two sources. The Indian foreign minister was at the beginning of talks with Sri Lanka’s neighbour.

After a drop of 70% in foreign currency reserves between January 2020 and now, the island nation has been struggling to import essential fuel and food. This led to an increase in currency exchange rates and attempts to get help from international lenders.

One source briefed said that New Delhi had indicated that it will comply with the request to open the line. The new line would be used for imports of essential products such as sugar, rice flour, pulses and medicine.

The second source stated that Sri Lanka had requested an extra $1 billion credit line to India in order to import essentials. This will add to the Indian $1 billion credit line.

The discussions between the sources were confidential so both of them declined to give their names.

Requests for comment were not received by the Indian foreign ministry and Sri Lanka’s finance and foreign ministries.

Basil Rajapaksa (Sri Lankan Finance Minister) signed the 1 billion dollar credit in New Delhi this month to assist with imports.

Subrahmanyam Jaishankar, Indian foreign minister, met Rajapaksa Monday. Rajapaksa had arrived in Colombo, Sri Lanka’s capital late on the previous night.

Jaishankar tweeted, (NYSE:), “Discussed India’s economic situation” and included a picture of Jaishankar next to each other.

India also extended credit lines to Sri Lanka, including a 400-million dollar currency swap and $500 million credit line to fuel purchases earlier in the year.

Imports from Sri Lanka stalled and caused shortages in many important items. Foreign currency reserves had fallen to $2.31 Billion by February.

This nation, located just south of India’s southern tip, must repay about $4Billion in debts during the year. It also has to pay $1-billion in international sovereign bonds that mature in July.

Rajapaksa will fly next month to Washington, D.C. to begin talks with the International Monetary Fund, (IMF), to discuss a rescue plan.

One source said that India was also supportive of Sri Lanka’s decision to apply for an IMF program and had given all their support.