NEW DELHI: India and Sri Lanka on Saturday reviewed the progress in extending loans worth a total of $1.5 billion to the island nation for emergency purchases of food, medicines and fuel to tide over an economic crisis.

The matter figured in a virtual meeting between external affairs minister S Jaishankar and Sri Lankan finance minister Basil Rajapaksa, who visited New Delhi last month to discuss a four-point financial assistance package.

Sri Lanka has been grappling with a severe debt and foreign exchange crisis, which has been exacerbated by a downturn in tourist arrivals because of the Covid-19 pandemic. Analysts believe the rapidly depleting foreign exchange reserves could result in a default on external debt.

Following a meeting between Indian envoy Gopal Baglay and Sri Lanka’s Central Bank governor Ajith Nivard Cabraal in Colombo on Thursday, India extended a Saarc currency swap facility of $400 million and deferred the payment of $515.2 million to the Asian Clearing Union (ACU) by two months to assist Sri Lanka.

At their meeting, Jaishankar and Rajapaksa “reviewed the progress in extending Indian credit facility of $1 billion for importing food, essential items and medicine and $500 million for importing fuel from India”, the external affairs ministry said in a statement. Jaishankar tweeted the two sides discussed the “early realisation” of these loans.

The ministers “positively noted” the extension of $400 million under the Saarc currency swap arrangement and deferral of the ACU settlement of $515.2 million, the statement said.

Jaishankar also tweeted that India will be a “steadfast and reliable partner of Sri Lanka”. He said he assured Rajapaksa that India will take up initiatives to support Sri Lanka at this important juncture with other international partners.

The statement said India “has always stood with Sri Lanka, and will continue to support Sri Lanka in all possible ways for overcoming the economic and other challenges posed by Covid-19 pandemic”. It added, “As close friends and maritime neighbours, both India and Sri Lanka stand to gain from closer economic inter-linkages.”