Sri Lanka to start talks with IMF on debt restructuring

Country facing worst financial crisis in years

COLOMBO:

Sri Lanka will begin talks with the International Monetary Fund (IMF) next month on a plan to help the crisis-hit country, including assistance with debt restructuring and managing its foreign exchange shortage, three sources said on Friday.

Sri Lanka is facing its worst financial crisis in years. With foreign exchange reserves standing at a paltry $2.31 billion, the country is struggling to pay for critical imports including fuel, food and medicines. 

The move to approach the IMF for help comes after months of resistance from Sri Lanka’s government and central bank, despite calls from opposition leaders and experts to seek a bailout package.

Finance Minister Basil Rajapaksa will travel to Washington DC in mid-April to present Sri Lanka’s proposal to senior IMF officials, two sources with knowledge of the ongoing discussions told Reuters.

“We are taking our proposal and a plan,” one of the sources said, declining to be named since the discussions are confidential. “The government is serious about fixing things.”

The island nation has to repay about $4 billion in foreign debt this year, including a $1 billion international sovereign bond maturing in July.

“We will discuss options based on our plans,” the source said.

Sri Lanka’s finance ministry and the IMF did not immediately respond to questions from Reuters.

‘Tough situation’

A combination of historically weak government finances, badly timed tax cuts and the Covid-19 pandemic, which hit the country’s lucrative tourism industry and foreign remittances, have wreaked havoc on Sri Lanka’s economy.

Published in The Express Tribune, March 12^th, 2022.

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