Sri lanka loan talks 'fruitful', says IMF as World Bank readies relief package
The country’s finance minister Ali Sabry held a series of meetings in Washington with the officials from the IMF, the World Bank, India and others, seeking financing help.
The International Monetary Fund on Saturday said that it had "fruitful technical discussions" with crisis-ridden Sri Lanka on its loan request. As the island nation - with a population of 22 million - struggles to pay for imports, the World Bank has also stated it is preparing an emergency aid package to mitigate the crisis.
Sri Lanka is battling a crushing debt crisis, resulting in scarce supplies of food and fuel, and prolonged power outages. Rating agencies have warned of a potential default on Sri Lanka's $51 billion foreign debt, and authorities are unable to raise more commercial loans because of credit downgrades, news agency Reuters reports.
Apart from financial, political crisis is also spiralling in Sri Lanka with residents taking to the streets and calling on President Gotabaya Rajapaksa to resign over mismanagement of the economy.
The country’s finance minister Ali Sabry held a series of meetings in Washington with the officials from the IMF, the World Bank, India and others, seeking financing help.
World Bank emergency package
According to a Reuters report, the World Bank's emergency response package includes $10 million to be made immediately available for the purchase of essential medicines. While the total value of the package has not yet been announced, Sabry said that about $500 million in aid was being considered.
The package would leverage existing bank-financed projects and repurpose funds to quickly provide medicines, meals for school children and cash transfers for poor and vulnerable households, the World Bank had said earlier.
It also expressed "deep concerns" over the crisis and said support to provide cooking gas, basic food supplies, seeds and fertilizers and other essentials is also under discussion, reported Reuters quoting official spokesperson.
Talks with IMF
After holding the negotiations with the Sri Lanka delegation on Saturday, the IMF released a statement, according to which the talks mainly focused on the need to implement a "credible and coherent strategy" to restore macroeconomic stability. They also stressed on the need to strengthen its social safety net and protect the vulnerable during the current crisis.
Help from India
In addition to the IMF loan and World Bank assistance, Sri Lanka is also in talks with the Indian government for $1.5 billion in bridge financing to help continue essential imports.
India has already agreed to defer USD 1.5 billion in import payments that Sri Lanka needs to make to the Asian Clearing Union. On Saturday, it also extended USD 500 million credit line to help Sri Lanka import fuel.
How much does Sri Lanka need?
Sri Lanka needs at least USD 4 billion to tide over its mounting economic woes, Sabry said on Saturday. The country has also approached China, Japan and the Asian Development Bank for help, Reuters also reported.
“It will be a difficult period in the next nine months. During that time there is a need to bring in more investments in US dollars into the central bank. We are talking with several countries. If these efforts are successful, and if investment of about USD 2 billion comes to the central bank, it will help stop the depreciation and stabilise the rupee,” Sabry said.
(With agency inputs)