March 28, 2023
Economy International

Sri Lanka seeks IMF bailout package amid economic crisis

Sri Lankan President Ranil Wickremesinghe has emphasized that seeking an International Monetary Fund (IMF) bailout package was the only option available for the debt-ridden country to overcome the ongoing economic crisis. The President cited the example of Greece, which took 13 years to recover from its collapsed economy after engaging in talks with the IMF. Wickremesinghe acknowledged the delay over Chinese willingness to restructure Sri Lanka’s debt had caused problems.

Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves. With assurances from creditors, the IMF facility could get board approval in March, enabling the island nation to obtain bridging finance from markets and other lending institutions.

IMF assistance or returning to last year’s situation

Wickremesinghe explained that if the IMF did not provide assistance, the island nation would have to return to its last year’s situation of unavailability of fuel and 12-hour power cuts. He added that the IMF had assigned Sri Lanka 15 tasks to complete, which had now been accomplished, and it was up to the IMF. He would meet the Chinese finance minister on February 23 to discuss the debt restructuring method of Sri Lanka with the Chinese Finance Minister.

Assurance of bailout and economic recovery

Sri Lanka was approved a 2.9 billion dollar bailout package over four years by the IMF in September last year, pending Sri Lanka’s ability to restructure its debt with creditors, both bilateral and sovereign bond holders. With assurances from creditors, the 2.9 billion dollar facility could get board approval in March, and the IMF facility would enable the island nation to obtain bridging finance from markets and other lending institutions such as the ADB and the World Bank. Wickremesinghe suggested that the different political parties in the country need to understand that the IMF is the only way to rebuild Sri Lanka’s collapsed economy.

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