Sri Lanka backtracks and asks for financial support from the IMF | Business and Economy News
Sri Lanka suffers from the worst inflation in Asia and struggles to stock up on essential goods and fuel.
Sri Lanka is seeking financial support from the International Monetary Fund, overturning earlier government resistance as efforts to bolster its foreign exchange reserves and manage looming debt payments have been complicated by war in Ukraine.
The government of President Gotabaya Rajapaksa began deliberations with visiting IMF staff on Monday, according to people familiar with the situation. Sri Lankan officials plan to present policy proposals to the lender in early April, said the people, who asked not to be identified as details are not public.
Separately on Monday, Lands Minister SM Chandrasena said in a TV interview that the cabinet had approved an IMF support package proposed by Finance Minister and brother of the President, Basil Rajapaksa.
Sri Lanka, which suffers from Asia’s worst inflation and struggles to stock up on essential goods and fuel, has recently softened its resistance to an IMF bailout.
Allies including China and India had delayed bilateral credit lines as global policymakers focused on the situation between Russia and Ukraine. In addition, the former Soviet states are also major island states source of touristsa key revenue driver that is expected to decline amid the conflict.
Sri Lanka dollar bonds due July 2022 gained for a fifth day on Tuesday, trading at 65.9 cents to the dollar.
The authorities have recently taken measures such as letting the rupee weaken and allowing borrowing costs to rise, measures in line with the general conditions expected from the IMF.
Sri Lanka has about $2 billion in foreign exchange reserves against total debt repayment of up to $7 billion for 2022. This includes a $1 billion bond maturing in July.
IMF officials in Sri Lanka this week are ready to discuss financial support options if needed, Mission Chief Masahiro Nozaki previously said in an emailed statement.