Sri Lanka looks to rely more on India until IMF funding agreed

SRI LANKA is counting on more help from India until it secures an International Monetary Fund (IMF) programme that’s hoped would unlock aid from other lenders to help face the worst economic crisis of its independent history.

The South Asian nation has been plagued by shortages of necessities, power cuts, and rampant inflation, which has triggered calls for the ouster of President Gotabaya Rajapaksa. Prime Minister Ranil Wickremesinghe, who this week also took on the role of finance minister, said on May 26 that he’s looking to fast-track talks with the IMF as the nation will need about US$4 billion this year from the multilateral lender and creditors including China and Japan.

Sri Lanka’s High Commissioner to India, Milinda Moragoda, met Finance Minister Nirmala Sitharaman in New Delhi on Friday (May 27) and reiterated that the island nation would require bridging finance until the IMF programme is finalised.

“In this context, the minister and the high commissioner explored the possibility of increasing and restructuring the assistance provided by India in the form of credits for essential commodities and fuel, as well as balance-of-payment support,” the high commission said on its Facebook page.

Sri Lanka’s central bank governor, Nandalal Weerasinghe, told a committee meeting in parliament this week that discussions with India were also ongoing for a swap facility of about US$1 billion from the Reserve Bank of India. 

Weerasinghe said the next 3 months would be the “biggest challenge” as the nation faced foreign-exchange shortages of about US$500 million monthly.

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While Sri Lanka expects about US$800 million to be channelled from ongoing World Bank and Asian Development Bank projects toward emergency assistance over the coming 6 months, the nation has so far largely been dependent on Indian credit for essential imports. BLOOMBERG