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The Government has decided to obtain a loan of USD 1 billion from international private lending agencies to set off interest payments for loans obtained from two state banks to purchase fuel, the Sunday Times reported.

Accordingly, the funds would be used to pay part of the interest owed by the Ceylon Petroleum Corporation (CPC) to the People’s Bank and the Bank of Ceylon.

"The Energy Ministry had initially held talks with the State Bank of Japan and the State Bank of China to obtain this USD 1 billion loan at an interest rate lower than 3 per cent but the talks were unsuccessful largely because of the economic crisis Sri Lanka was facing," the Sunday Times reported.

Rs. 652 billion owed to state banks

In addition to spending foreign exchange, the Ceylon Petroleum Corporation has been a loss-making institution, relying on loans obtained from the Bank of Ceylon and the People’s Bank annually while the amount to be paid to the two banks as loans is Rs. 652 billion, the President's Media Division (PMD) said.

The PMD made this observation in a special press release issued on 13 June justifying the Government's decision to increase fuel prices.