India has rushed 40,000 tonnes of diesel under a $1 billion credit line given to Sri Lanka. The ship carrying the fuel has reached the island nation and the fuel is expected to be distributed across Sri Lanka this evening.

Sri Lanka is in the grip of its worst economic crisis since independence.

The transport sector in the country has ground to a halt and there are extensive power outages as electricity generation has been hit. 

The Sri Lankan economy is on the brink of bankruptcy as it is running out of foreign exchange reserves amid an acute shortage of goods that has led to a surge in inflation.

Sri Lanka's President Gotabaya Rajapaksa declared a state of emergency on Friday, giving sweeping powers to security forces a day after hundreds tried to storm his house in anger over the unprecedented economic crisis.

Sri Lanka's predicament has been compounded by the COVID-19 pandemic, which torpedoed tourism and remittances. Many economists also say the crisis has been exacerbated by government mismanagement and years of accumulated borrowing.

Cash strapped Sri Lanka, with a debt burden of $6.9 billion this year, had sought another credit line of $1.5 billion from India to meet its import requirements. India has already provided $1.5 billion to Sri Lanka.

In February, New Delhi provided $500 million to Colombo that helped the island nation in oil purchases. A $1 billion credit line was signed during Sri Lankan finance minister Basil Rajapaksa’s visit to New Delhi earlier this month.

Meanwhile, the International Monetary Fund said that Sri Lanka was facing solvency issues because of risks stemming from unsustainable debt levels that jeopardize the nation’s economy, Bloomberg in a report said.

While initially Sri Lanka was hesitant in seeking assistance from the IMF, Colombo is now expected to initiate negotiations with the multilateral agency for a possible bailout package.

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