Monday, July 4, 2022

Sri Lanka urgently seeks US$6 billion to keep economy afloat

The government has already defaulted on its US$51 billion foreign debt, and a critical shortage of foreign currency has left traders unable to import adequate supplies of food, fuel and other essential goods.

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Cash-strapped Sri Lanka on Tuesday asked the International Monetary Fund to arrange a creditor meeting for US$6 billion in loans to help keep the country afloat during its unprecedented economic crisis.

Months of daily blackouts, long queues for petrol and record inflation have made daily life a misery in the South Asian island nation of 22 million people.

The government has already defaulted on its US$51 billion foreign debt, and a critical shortage of foreign currency has left traders unable to import adequate supplies of food, fuel and other essential goods.

Prime Minister Ranil Wickremesinghe said the country needed US$5 billion for its daily needs in the next six months, along with another billion to stabilise Sri Lanka’s rapidly depreciating rupee.

“We call on the International Monetary Fund to hold a conference to help unite our lending partners,” the premier told parliament.

He said a meeting under IMF auspices with China, Japan and India – Sri Lanka’s three biggest bilateral lenders – would be a “great strength” in helping source more loans.

Sri Lanka is already in talks with the IMF for a bailout and has appointed international experts to help restructure its debt, about half of which is in international sovereign bonds.

Wickremesinghe again warned the country was heading for serious food shortages and said the United Nations had agreed to issue an urgent appeal on Thursday to raise humanitarian funds.

A disastrous ban on agricultural chemical imports, introduced by President Gotabaya Rajapaksa last year, dramatically curtailed crop yields and led to protests by farmers.

The policy was reversed months later, but Sri Lanka is now out of foreign currency to import fertiliser, pesticides and other much-needed farming chemicals.

Wickremesinghe became premier in May after his predecessor, Mahinda Rajapaksa, the elder brother of the president, stepped down after months of protests against the government’s economic mismanagement.

At least nine people were killed and many more wounded in riots that followed an attack on peaceful demonstrators outside President Rajapaksa’s office in Colombo last month.

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