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Wednesday, March 22, 2023
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Sri Lanka Seeks Financial Support from IMF

Sri Lanka is requesting financial assistance from the International Monetary Fund, changing its previous opposition, as the government’s efforts to boost foreign exchange reserves and handle upcoming debt payments have been hindered by the conflict in Ukraine.

According to those familiar with the situation, President Gotabaya Rajapaksa’s government began negotiations with visiting IMF employees on Monday. Sri Lankan officials expect to offer policy suggestions to the lender in early April, according to the people, who requested anonymity because the details aren’t public.

Separately, Lands Minister S. M. Chandrasena stated in a television appearance on Monday that the cabinet had approved an IMF support proposal suggested by Finance Minister and President Mahinda Rajapaksa’s brother, Basil Rajapaksa.

Sri Lanka, which has Asia’s highest inflation and is having trouble obtaining basic supplies and petrol, has recently softened its opposition to an IMF bailout.

As global policymakers focused on the Russia-Ukraine conflict, allies such as China and India suspended bilateral credit lines. In addition, the former Soviet states are the island nation’s primary supply of tourists, a vital source of cash that is anticipated to dwindle as the conflict progresses.

On Tuesday, Sri Lankan dollar bonds due in July 2022 rose for the sixth day, trading at 65.9 cents on the dollar.

Authorities have lately taken steps such as permitting the currency to fall and borrowing costs to rise, both of which are in accordance with the IMF’s general requirements.

Sri Lanka has approximately $2 billion in foreign-currency reserves, with a total debt repayment of up to $7 billion due in 2022. This includes a $1 billion bond that will be due in July.

Mission Chief Masahiro Nozaki had previously stated in an emailed statement that IMF officials in Sri Lanka are ready to discuss financial support alternatives if asked this week.

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