Sri Lanka resumes bailout discussions with IMF

SRI LANKA has resumed technical discussions with the International Monetary Fund on a potential bailout after a new government took office, the finance ministry said on Friday (Jul 29).

Discussions with the multilateral lender started in April under former President Gotabaya Rajapaksa.

The Sri Lankan government hopes to secure an Extended Fund Facility (EFF) - which would be conditional on making economic reforms - to help battle the worst economic crisis since independence in 1948.

Ranil Wickremesinghe was appointed as president after Rajapaksa was ousted on July 13 by a popular uprising following months of severe shortages of fuel, food and medicines.

Wickremesinghe, who served six terms as prime minister, also hopes to restructure Sri Lanka’s debt.

The talks with IMF were highly successful and Sri Lanka is working with advisers to reach consensus on a deal with creditors, the government said.

The South Asian nation of 22 million has US$12 billion overseas debt with private creditors. It defaulted on a bond payment earlier this year and is struggling to pay for imports of basic goods.

The World Bank said Friday it would not offer new funding to Sri Lanka unless the bankrupt island nation carried out “deep structural reforms” to stabilise its crashing economy.

The South Asian nation defaulted on its US$51-billion foreign debt in April.

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“Until an adequate macroeconomic policy framework is in place, the World Bank does not plan to offer new financing to Sri Lanka,” the lender said in a statement.

“This requires deep structural reforms that focus on economic stabilisation, and also on addressing the root structural causes that created this crisis.”

The World Bank said it had already diverted US$160 million from existing loans to finance urgently needed medicines, cooking gas and school meals. REUTERS, AFP