Sri Lanka looks to IMF for an immediate bail out | Business and Economy News

A Sri Lankan delegation will visit Washington next week, seeking to secure up to $4 billion from the International Monetary Fund and other lenders to help the island nation pay for food and fuel imports. and limit default.

The team led by newly appointed Finance Minister Ali Sabry hopes to begin negotiations with the final lender on April 18 and secure aid as early as a week after the talks. judge.

“We need urgent funding right away to get Sri Lanka back on track,” Sabry said in an interview with Bloomberg Television on Thursday, tying this year’s funding needs to 3- 4 billion USD. “Our appeal to them is to release it as soon as possible.”

Sabry will join the talks by Central Bank Governor Nandalal Weerasinghe and Finance Minister Mahinda Siriwardana, both of whom already have ties to the IMF.

However, political turmoil at home, with street protests by residents calling for Rajapaksa’s ouster, only made the job of persuading the IMF to lend money more difficult. The $81 billion economy must face 8.6 billion USD the value of its debt obligations this year before it halted payments on foreign loans to keep cash to pay for essential food and fuel imports.

“With all their expertise we are looking to make a good case for us which will protect the Sri Lankan economy,” Sabry said, affirming confidence in the team he will join. lead. Governor Weerasinghe replaced Ajith Nivard Cabraal, one of the strongest advocates of ending dependence on the IMF, while Minister Siriwardana took over Sajith Attygalle, also known for his role. against aid from multilateral lenders.

Even if officials are willing to work with the IMF, it will be a difficult task for Sri Lanka to raise the kinds of funds that Sabry says the country needs to weather its balance of payments crisis this year. now.

The last time the IMF extended its help to Sri Lanka in 2016, the loan was capped at $1.5 billion, and the program was terminated early after $1.3 billion was disbursed. That’s when the economy is growing around 5% and tourism makes up a similar percentage of gross domestic product.

In the absence of tourism revenue, Sri Lanka has recently turned to countries including China and India for support amid weak foreign exchange reserves. The country is also in talks with the World Bank and the Asian Development Bank for assistance, Sabry said.

Sri Lankan High Commissioner to India Milinda Moragoda met Finance Minister Nirmala Sitharaman in New Delhi to seek further help to secure food and fuel imports to the island nation, a statement from the high commission said. . speak. New Delhi has offered a $1 billion line of credit to buy food, medicine and other essential items as well as $500 million to import fuel since the crisis.

Sri Lanka faces soaring dollar debt payments in coming years

Citigroup Global Markets hopes the IMF’s involvement will help negotiate with bondholders, as Sri Lanka appears to be asking them to cut their hair for payments owed to them. Analysts Donato Guarino and Johanna Chua may require investors to accept a loss of 50% of profit and 20% of principal.

“If you are part of our prosperity and make money from it, then when we are not doing well, you need to cut your hair,” says Sabry. “It’s going to be a long, long discussion.”

Sanjeewa Fernando, strategist at CT CLSA Securities in Colombo, said a loan restructuring plan needs to be credible and one that will reduce debt to a sustainable level. He also stressed the need for fiscal reform with an official timeline.

Authorities are also looking to cut spending, including by freezing hiring at government agencies.

“As we have already begun discussions with the IMF, strengthening our financial space is key,” said Siriwardana, adding that the government will also look at ways to increase it. state budget revenue.

Before the talks, Sri Lanka raised interest rates, devalued the local currency and restricted non-essential imports. The country’s prime minister also urged people to be patient as prices soar and shortages of food to supply medicines worsen.

The IMF said it was “monitoring economic and political developments very closely” and was “very concerned” with the hardships faced by people, especially the poor and vulnerable.

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