Sri Lanka’s government will seek financial support from the IMF, softening opposition to the international lender as it desperately tries to rescue the country’s beleaguered economy, which is currently teetering under a severe currency crisis. Finance Minister Basil Rajapaksa nodded on Tuesday to seek help from the International Monetary Fund (IMF). […]
Sri Lanka’s government will seek financial support from the IMF, softening opposition to the international lender as it desperately tries to rescue the country’s beleaguered economy, which is currently teetering under a severe currency crisis. Finance Minister Basil Rajapaksa nodded on Tuesday to seek help from the International Monetary Fund (IMF).
“The finance minister has received cabinet approval to begin talks with the IMF,” cabinet spokesman Ramesh Pathirana told reporters.
Sri Lanka’s economy faced “mounting challenges” with government debt reaching “unsustainable levels”, the IMF said earlier this month, calling for urgent reforms in the island’s economy as it faces the worst economic crisis. faced. Sri Lanka is currently plagued by a severe foreign exchange crisis with declining reserves and the government is unable to foot the bill for essential imports.
“Sri Lanka has been hit hard by COVID-19. On the eve of the pandemic, the country was highly vulnerable to external shocks due to inadequate external buffers and high risks to public debt sustainability, exacerbated by the Easter Sunday terrorist attacks in 2019 and major policy changes, including major tax cuts in late 2019,” the IMF said in a press release after the global lender’s advisory meeting of the global lender’s board of directors on Feb. 25.
On Monday, IMF Asia-Pacific chief Changyong Rhee met Rajapaksa to discuss the finer aspects of the package.
Pathirana said technical assistance would be requested from the IMF. Meanwhile, Finance Minister Rajapaksa left for New Delhi on Tuesday to sign a new $1 billion bailout package with India. The credit line is expected to fund fuel, food and drug imports, the Treasury Department said.
Last month, Sri Lanka bought 40,000 tons of diesel and gasoline from Indian oil giant Indian Oil Corporation to meet urgent energy needs in the economic crisis exacerbated by depleted foreign reserves.
“India is a committed partner and a true friend of Sri Lanka. The High Commissioner (Gopal Baglay) handed over a 40,000-ton shipment of fuel from Indian Oil Company,” the Indian High Commission said in a statement here.
India had also announced a $900 million loan to Sri Lanka to rebuild its depleted foreign reserves and for food imports, amid a shortage of nearly all essential goods in the country. The growing shortage of foreign exchange in Sri Lanka has had serious consequences for the energy sector, which is completely dependent on imports for its oil needs. The fuel shortage has led to long queues at substandard pumps across the country.
Sri Lanka’s economy also faces scarcity of food and other basic necessities, pushing inflation to a record 25 percent last month. Tourism, another major source of foreign exchange income, has also witnessed a lull due to the pandemic.
This post Sri Lanka asks IMF for help as FM Rajapaksa leaves for New Delhi to sign new rescue package with India was original published at “https://www.financialexpress.com/economy/sri-lanka-reaches-out-to-imf-for-help-as-fm-rajapaksa-departs-for-new-delhi-to-sign-fresh-bailout-package-with-india/2461812/”