Sri Lankan delegation heads to US to seek $4 billion bailout package from IMF

The visit is taking place days after the finance ministry on Tuesday announced that it is suspending repayments of foreign debt

April 17, 2022 02:57 pm | Updated 06:51 pm IST - Colombo

Sri Lanka Finance Minister Ali Sabry

Sri Lanka Finance Minister Ali Sabry | Photo Credit: Reuters

A Sri Lankan government delegation is headed to the U.S. on Sunday to engage with the IMF to secure a $4 billion package as it desperately tries to salvage the country's beleaguered economy currently reeling under a severe forex crisis.

The delegation led by newly-appointed Finance Minister Ali Sabry will hold talks with the International Monetary Fund (IMF) between April 19 and April 24.

Mr. Sabry has said that Sri Lanka is seeking a bail out package of $4 billion from the IMF, having earlier resisted calls to seek a facility from the global lender.

The visit is taking place days after the finance ministry on Tuesday announced that it is suspending repayments of foreign debt, including bonds and government-to-government borrowing, pending the completion of a loan restructuring programme with the International Monetary Fund (IMF). Sri Lanka had to meet $7 billion of debt payments this year.

This was the first ever debt default by Sri Lanka in its history since 1948 and the country's 22 million people are facing crippling 12-hour power cuts, and an extreme scarcity of food, fuel and other essential items such as medicines.

The Securities and Exchange Commission of Sri Lanka (SEC) on Saturday announced that the Colombo Stock Exchange will remain temporarily closed for a week from Monday to provide investors an opportunity to have "more clarity and understanding" of the current economic conditions in crisis-hit Sri Lanka that would help them "to make informed investment decisions".

Sri Lanka is facing its worst economic crisis since gaining independence from the UK in 1948. The economic crisis also triggered a political turmoil in the island nation with citizens holding nationwide street protests for weeks over lengthy power cuts and shortage of fuel, food and other daily essentials and demanding ouster of President Gotabaya Rajapaksa.

Earlier this month, Sri Lanka's entire Cabinet — aside from President Gotabaya and his elder brother, Prime Minister Mahinda Rajapaksa — resigned from their posts after thousands of people defied a countrywide state of emergency and curfew and joined street protests denouncing the government.

According to sources, President Gotabaya has made arrangements to swear in a smaller Cabinet anytime soon. It will not feature any member of the Rajapaksa family other than Prime Minister Mahinda.

President Gotabaya had fired his brother and finance minister Basil Rajapaksa from his post earlier this month and invited the Opposition parties to join a unity Cabinet to tackle the raging public anger against the hardships caused by the economic crisis. The Opposition rejected the offer to form a unity Cabinet. The Opposition is to move a no trust motion against the government next week.

With the acute shortage of forex, an Indian credit line of $500 million for fuel imports has provided a lifeline to the island nation.

India recently announced to extend a $1 billion line of credit to Sri Lanka as part of its financial assistance to the country to deal with the economic crisis following a previous $500 billion line of credit in February to help it purchase petroleum products.

President Rajapaksa has defended his government's actions, saying the foreign exchange crisis was not his making and the economic downturn was largely pandemic driven with the island nation’s tourism revenue and inward remittances waning.

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