US$ 7 m credit facility for oil imports from Iran

Hiran H.Senewiratne

The Government was able to secure seven months credit facility to import crude oil from Iran following President Mahinda Rajapaksa's State visit, Treasury Secretary Dr. P.B. Jayasundera told the Daily News.

Iran pledged aid totalling US$ 1.5 billion to Sri Lanka during the President's visit. Dr. Jayasundera said that 70 per cent of the total local crude oil requirement, amounting to US $ 700 million, is fulfilled by Iran. "However, if we purchase oil at today's world market price (US$ 95-100 for a barrel) our oil bill will exceed more than US$ one billion."

Therefore, the Iranian Government has extended a seven-month credit facility which amounts to US$ 7 million. Iran has also considered a four month credit line and a further three month credit with concessionary terms is a big relief to the country at this juncture, Dr Jayasundera said.

"It is a major achievement for the Government.

"This will assist Sri Lanka to purchase crude oil from Iran without paying them immediately enabling to ease the current foreign currency pressure to a greater extent," the Treasury Secretary said.

Sri Lanka will also be able to save US$ 1 million a year with the removal of certain regulations like Letters of Credit by the Iranian Government, Dr Jayasundera said.

The high import duty levied by Iran on Sri Lankan tea exports will be removed following discussions between President Rajapaksa and Iranian President Mahmoud Ahmadinejad during his visit, Dr Jayasundera said.

Since Iran purchases 30 million Kg of tea annually from Sri Lanka which accounts for 10 per cent of the total tea exports, it will benefit the tea industry immensely, he said. Sri Lanka will get more opportunities to export value-added tea. With this trade facilitation between two countries, the exchange rates are expected to strengthen and stabilise.

The exchange rate has now stabilised at Rs 110 from Rs 114 per US dollar, he said.