IMF asks cash-strapped Sri Lanka to restructure huge foreign debt

Crisis-hit island nation also seeks bridge loans as IMF aid will take six months

The International Monetary Fund said on Wednesday that it has asked cash-strapped Sri Lanka to “restructure” its huge foreign debt before a bailout programme could be finalised as anti-government protests escalated across the island.

 Sri Lanka is reaching out to several nations for bilateral credit as a comprehensive aid package from the International Monetary Fund may require about six months. 

India is providing “every conceivable assistance,” Foreign Minister GL Peiris told reporters at a briefing in Colombo on Wednesday, adding that he will be meeting the Chinese ambassador  on Thursday. Sri Lanka is also seeking help from Japan, Oman, Qatar and the Gulf Cooperation Council countries. 

But a full package will need about six months and “we need to find bridging finance.”

Meanwhile, the Fund said discussions with Sri Lanka on a potential IMF loan programme were at an early stage and any deal would require “adequate assurances” that the island country’s debts can be put on a sustainable path.

In a statement emailed to Reuters, IMF Sri Lanka Mission Chief Masahiro Nozaki said that IMF Managing Director Kristalina Georgieva discussed lending options and policy plans with a Sri Lankan delegation on Tuesday.

“An IMF-supported program should be designed to resolve Sri Lanka’s acute balance of payments problems and put the economy back on a sustainable growth path as early as possible,” Nozaki said.

  

But he noted that IMF staff had determined last month in an annual economic review that Sri Lanka’s public debt was unsustainable, and the country needs to take steps to restore debt sustainability prior to any IMF lending, including the emergency Rapid Financing Instrument (RFI). 

Such restoration of debt sustainability typically requires a restructuring or reprofiling of public debts, which in Sri Lanka’s case would require cooperation from China, one of its largest bilateral creditors.

‘World Bank ready to provide emergency support to Sri Lanka’

The World Bank is ready to provide emergency support to Sri Lanka and protect the vulnerable people amidst the unprecedented economic crisis in the country, a media report on Wednesday quoted a senior official of the global lender as saying. Sri Lanka, which is on the brink of bankruptcy, is grappling with an unprecedented economic turmoil, the worst since its independence from Britain in 1948. World Bank Vice President Hartwig Schafer held talks with Sri Lankan Finance Minister Ali Sabry in Washington on Tuesday, the Colombo Gazette reported on Wednesday. Finance Minister Sabry is in the US for the annual spring meetings of the International Monetary Fund IMF and the World Bank . PTI

PM Gotabaya Orders Probe after 1st death amid protests

Sri Lankan police will launch an “impartial and transparent” investigation of clashes with protesters after the first death in weeks of unrest over the government’s handling of the economy, the president said on Wednesday. Police fired live ammunition to scatter protesters on Tuesday. Reuters

In fresh blow to rajapaksa govt, 3 MPs withdraw their support

Sri Lankan President Gotabaya Rajapaksa was dealt a further blow on Wednesday when three more parliamentarians withdrew their support to the government. Earlier this month, 39 lawmakers out of 

156 MPs pulled their support to Rajapaksa in the 225-member Parliament.  PTI