Sri Lanka has sought an additional credit line of $1.5 billion from India to import essentials, the island nation's central bank governor said on Monday, amid its worst economic crisis in decades.

The country of 22 million people is struggling to pay for essential imports after a 70% drop in foreign exchange reserves in two years led to a currency devaluation and efforts to seek help from global lenders.

Fuel is in short supply, food prices are rocketing and protests have broken out as Sri Lanka's government prepares for talks with the International Monetary Fund amid concerns over the country's ability to pay back foreign debt.

The new line is on top of the $1 billion support extended by India to help pay for critical imports when Sri Lankan Finance Minister Basil Rajapaksa travelled to New Delhi earlier this month.

"There is a very close discussion continuing for an additional support of $1.5 billion (with India) by way of oil support as well as other essential goods support of credit terms," Ajith Nivard Cabraal told an online event.

Cabraal's comments followed a Reuters report that said the crisis-hit country was in talks with India for an additional credit line of $1 billion.

New Delhi has indicated it would meet the request for the new line, to be used for importing essential items such as rice, wheat flour, pulses, sugar and medicines, one source briefed on the matter told Reuters.

India's foreign ministry did not respond to a request seeking comment.

REGIONAL RIVALRY

India's support for the roiled Sri Lankan economy comes after previous administrations led by the powerful Rajapaksa family drew the island nation closer to China during the past decade, leading to unease in New Delhi.

In Sri Lanka's main city of Colombo for talks, Indian Foreign Minister Subrahmanyam Jaishankar met the finance minister and his brother, President Gotabaya Rajapaksa, on Monday.

"Reviewed various dimensions of our close neighbourly relationship," Jaishankar said in a tweet after meeting the president. "Assured him of India's continued cooperation and understanding."

In addition to the credit lines, India this year extended a $400-million currency swap and a $500-million credit line for fuel purchases to Sri Lanka.

"India will be an ally for Sri Lanka's future progress," Cabraal said.

Sri Lanka's imports stalled, causing shortages of many essential items, after foreign currency reserves fell to $2.31 billion by February.

The nation just off India's southern tip has to repay debt of about $4 billion in the rest of this year, including a $1-billion international sovereign bond that matures in July.

Faced with a swiftly deepening crisis, President Rajapaksa has also sought help from Beijing, including a request to restructure debt payments.

His government is negotiating $2.5 billion in credit support from China, with a decision expected in the next few weeks.

Finance Minister Rajapaksa is set to fly to Washington, D.C. next month to start talks with the IMF for a rescue plan and also seek support from the World Bank.

"India is also very supportive of Sri Lanka's decision to seek an IMF programme and has given their fullest support," another source said.

Sri Lanka's government bonds fell on Monday after the IMF warned the country needed a "comprehensive strategy" to make its debt sustainable.

(Writing by Devjyot Ghoshal and Aftab Ahmed; Editing by Clarence Fernandez, Mark Potter and Ed Osmond)