Crisis-hit Sri Lanka plans IMF talks on Monday for at least $4B aid
Sri Lanka is also facing a foreign exchange shortage, which has affected its capacity to import food and fuel
Sri Lanka is planning to start the talk with the International Monetary Fund (IMF) on 18 April to secure at least USD 4 billion in aid for the economy, said Sri Lanka Finance Minister, local media reported.
While responding to financial aid, Sri Lanka is asking from IMF, new Finance Minister, Ali Sabry said, "We may need 3-4 billion cash injections from external sources for the rest of the year," Colombo Page reported citing Sabry's interview with Bloomberg News.
He said that the burden of debt is now out of the equation as the aid they seek will be to support the balance of payment crisis and also for the continuous supply of fuel. So that the power cuts can be prevented and the industries could operate smoothly.
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The island nation's Finance Minister further said that the country needs a social protection net to look after the poorest from high inflation.
According to Colombo Page, Sabry discussed the financial support that Sri Lanka is receiving from India. He said that India always said that they will help until Sri Lanka can stand on its own.
Minister Sabry expressed hope that Sri Lanka will be able to pull through with the help of China, India, IMF, World Bank, and Asian Development Bank (ADB).
He further said that it will be a very difficult time for the next 6-9 months or even a year. "These times are going to be very difficult going forward," Sabry was quoted as saying by Colombo Page.
Meanwhile, the World Bank said that Sri Lanka needs urgent policy measures to address its high levels of debt and debt service, reduce the fiscal deficit, and restore external stability.
The World Bank made this statement in its twice-a-year regional update.
The island nation's economy has been in a free fall since the onset of the Covid-19 pandemic, leading to the crash of the tourism sector.
Sri Lanka is also facing a foreign exchange shortage, which has affected its capacity to import food and fuel. The shortage of essential goods forced Sri Lanka to seek assistance from friendly countries.
Released on Wednesday, the World Bank's latest 'South Asia Economic Focus Reshaping Norms: A New Way Forward' projects the region to grow by 6.6 per cent in 2022 and by 6.3 per cent in 2023. The 2022 forecast has been revised downward by 1.0 percentage points compared to the January projection, mostly due to the impact of the war in Ukraine.
This comes as countries in South Asia are already grappling with rising commodity prices, supply bottlenecks, and vulnerabilities in financial sectors. The war in Ukraine will amplify these challenges, further contributing to inflation and deteriorating current account balances.
