Sri Lanka seeking $3 billion in months to stave off crisis: finance minister

Sri Lanka seeks further $500 mln from India for fuel

April 09, 2022 05:47 pm | Updated 07:01 pm IST - COLOMBO

Ali Sabry, newly appointed minister of finance, speaks during an interview with Reuters, amid the country’s economic crisis in Colombo, Sri Lanka, April 9, 2022.

Ali Sabry, newly appointed minister of finance, speaks during an interview with Reuters, amid the country’s economic crisis in Colombo, Sri Lanka, April 9, 2022. | Photo Credit: REUTERS

Sri Lanka will need about $3 billion in external assistance within the next six months to help restore supplies of essential items, including fuel and medicines, to manage a severe economic crisis, its finance minister told Reuters on Saturday.

The island nation of 22 million people has been hit by prolonged power cuts, with drugs, fuel and other items running short, bringing angry protesters out on the streets and putting President Gotabaya Rajapaksa under mounting pressure.

"It's a Herculean task," Finance Minister Ali Sabry said in his first interview since taking office this week, referring to finding $3 billion in bridge financing as the country readied for negotiations with the International Monetary Fund (IMF) this month.

The South Asian island nation will look to restructure international sovereign bonds and seek a moratorium on payments, and is confident of negotiating with bondholders for an upcoming $1 billion payment in July.

"The entire effort is not to go for a hard default," Mr. Sabry said. "We understand the consequences of a hard default."

J.P. Morgan analysts estimated this week that Sri Lanka's gross debt servicing would amount to $7 billion this year, with the current account deficit coming in around $3 billion.

The country has $12.55 billion in outstanding international sovereign bonds, according to central bank data, and foreign reserves of $1.93 billion at the end of March.

"The first priority is to see that we get back to the normal supply channel in terms of fuel, gas, drugs... and thereby electricity so that the people's uprising can be addressed," Mr. Sabry said.

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