Economic crisis in Lanka: talks on loan request are “fruitful”

The International Monetary Fund said on Saturday it had “fruitful technical discussions” with Sri Lanka over its loan request, while the World Bank said it was preparing an emergency aid package for the crisis-stricken country.

Sri Lanka, an island nation of 22 million people, is struggling to pay for its imports amid a crippling debt crisis and a sharp drop in foreign exchange reserves that has fueled runaway inflation.

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Prolonged power cuts and shortages of fuel, food and medicine have sparked protests across the country.

Sri Lankan Finance Minister Ali Sabry traveled to Washington this week to speak to the IMF, World Bank, India and others about financial assistance to his country, which suspended payments on part of its $51 billion foreign debt.

The World Bank’s emergency response program includes $10 million to be made available immediately for the purchase of essential medicines, funds transferred from its ongoing Covid-19 health preparedness project, a spokesperson said. word of the World Bank.

The World Bank, which along with the IMF held its spring meetings this week, did not provide a full value for its program, but Sabry said around $500 million in aid was being considered.

The World Bank spokesperson said the program would leverage existing Bank-funded projects and reallocate funds to rapidly provide medicine, school meals and cash transfers to poor and vulnerable households.

Support to provide cooking gas, basic foodstuffs, seeds and fertilizers and other basic necessities is also being discussed, the spokesperson said, adding that the World Bank was “deeply concerned” about the situation in Sri Lanka.

The IMF said in a statement on Saturday that the talks between its staffs focused on the need for Sri Lanka to implement “a credible and coherent strategy” to restore macroeconomic stability, strengthen its social safety net and protect the poor. poor and vulnerable during the current crisis. crisis.

“The IMF team welcomed the authorities’ plan to engage in a collaborative dialogue with their creditors,” IMF mission chief in Sri Lanka Masahiro Nozaki said in a statement after the country took steps to explore a restructuring of some $12 billion of sovereign bonds.

Sabry told reporters on Friday that talks with the IMF were focused on a more traditional Expanded Financing Facility program, but $3 billion to $4 billion in bridge financing was needed while that could be finalized.

The IMF has said Sri Lanka’s debt must be placed on a sustainable path before it can provide new loans to Colombo – a process that could require lengthy negotiations with China and the country’s other creditors.

Sabry said on Friday that in addition to the IMF loan and World Bank assistance, Sri Lanka was discussing with India bridging financing of around $1.5 billion to help continue imports. essential, and added that he had also approached China, Japan and the Asian Development Bank to help.