IMF Will Meet Sri Lanka on Possible Loan as Street Protests Grow
Posted on April 10th, 2022
, Bloomberg News
(Bloomberg) — The International Monetary Fund said it will hold discussions with senior Sri Lankan policymakers in the coming days and weeks” about a possible support program to help the island nation overcome an economic crisis that’s spiraled into political turmoil and daily street protests.
We received a request for an IMF-supported program from the authorities, and have started technical-level engagement with teams at the ministry of finance and the central bank,” Masahiro Nozaki, the IMF’s mission chief for Sri Lanka, said in a statement. We commit to assisting Sri Lanka consistent with our policies.”
The South Asian island has appointed an advisory panel to provide guidance on how the nation deals with its current crisis and engages with outside lenders, including the IMF. Sri Lanka is facing a balance of payments crisis, struggling to pay for imports and service debt as its foreign exchange holdings dwindle.
The IMF is very concerned about the current economic crisis in Sri Lanka and hardships suffered by the people, especially the poor and vulnerable,” Nozaki said in the statement. We are monitoring the political and economic developments very closely,” he said.
Newly appointed central bank Governor Nandalal Weerasinghe said on Friday that Sri Lanka would seek virtual talks with the IMF before officials visit Washington for the lender’s spring meetings later this month. Authorities have also called for proposals for a financial adviser and legal consultant to help with recasting the nation’s debt, which stands at $8.6 billion for this year, including a $1 billion sovereign bond payment in July.
Sri Lanka is seeking about $3 billion in bridge financing in the next six months to pay for fuel, medicine and other essentials, to help it manage the crisis, Finance Minister Ali Sabry told Reuters in an interview Saturday.
The nation’s central bank on Friday raised borrowing costs by an unprecedented 700 basis points to cool inflation that’s the fastest in Asia, preserve dollars needed to import food and fuel and lend support to the local currency that has dropped more than 57% since being devalued.
Resignation Demands
President Gotabaya Rajapaksa, left with a minority in parliament, has been struggling to form an interim government after his cabinet resigned last week. On Sunday night, he will meet with the over 40 lawmakers who left his ruling coalition to discuss their proposals for an interim government, local media reported, citing a senior member of parliament.
The proposals put forward include limiting his executive powers as president and appointing a national executive council comprising of leaders from all the political parties in parliament to make policy decisions and appoint a new prime minister.
The talks come as thousands of people converged in Colombo’s business district over the weekend, waving flags and holding placards demanding that Rajapaksa, a former military officer, submits his resignation. Rajapaksa has yet to address the country over the economic and political turmoil since his cabinet resigned.
Several protesters waited near the president’s office and said they would not leave until he quits, according to videos posted on social media and news reports. The demonstrations are expected to continue well into Sunday in Colombo and across several smaller cities and towns.