Sri Lanka asks IMF for urgent financial assistance

The IMF may consider this request due to the unique circumstances, an aide to the nation’s finance minister said.

Demonstrators in Colombo, Sri Lanka, holding the flag
Protests have erupted in the island nation as it battles a devastating financial crisis [File: Buddhika Weerasinghe/ Bloomberg]

Sri Lanka has requested the International Monetary Fund (IMF) for urgent financial assistance and the global lender could consider it after initial reluctance, an aide to the country’s finance minister said.

Protests have erupted in the island nation as it battles a devastating financial crisis brought about by the effects of COVID-19, mismanaged government finances and rising fuel prices that have sapped foreign reserves.

A delegation headed by Sri Lanka’s finance minister Ali Sabry kicked off formal talks with the IMF in Washington, DC, on Monday for a programme the government hopes will help top up its reserves and attract bridge financing to pay for essential imports of fuel, food and medicines.

“The (foreign minister) made a request for a Rapid Financing Instrument (RFI) to mitigate the current supply chain issues, yet initially IMF of the view that it doesn’t meet their criteria,” Sabry’s aide Shamir Zavahir said on Twitter.

“However, India subsequently made representations on an RFI for (Sri Lanka) as well and IMF may consider this request due to the unique circumstances.”

He added that the IMF “appears to be positive” towards granting an extended fund facility – a longer facility of up to four years with easier, and longer, repayment terms. “Ideally if this can be expedited, it can help stabilise things in the short term till long-term solutions kick in,” he tweeted.

Sri Lanka is seeking $3bn in the coming months from multiple sources including the IMF, the World Bank and India to stave off the crisis, Sabry told Reuters earlier this month.

Both India and China have already extended billions of dollars in financial support to Sri Lanka. Sabry met his Indian counterpart Nirmala Sitharaman on the sidelines of the IMF deliberations, and both sides said they agreed to deepen their cooperation.

“India will fully support the deliberations of Sri Lanka with the IMF, especially on the special request made for expediting an extended fund facility,” Sabry’s office said, citing his meeting with Sitharaman.

Sources have told Reuters India would keep helping out its neighbour as it tries to regain influence lost to China in recent years. Beijing is one of Sri Lanka’s biggest lenders and has also built ports and roads there.

Last week, the country’s central bank said it was suspending repayment on some of its foreign debt pending a restructure.

Mounting protests

In the commercial capital Colombo, protests demanding the removal of President Gotabaya Rajapaksa have dragged on for more than a week.

In parliament on Tuesday, the prime minister reiterated a call for a unity government that the opposition has rejected.

In a bid to quell the protests and demands for their resignation, the Rajapaksa brothers have also offered to reduce the executive powers of the president by amending the constitution.

“Together with the support of the president, we will move towards broad constitutional reforms,” said Mahinda Rajapaksa, a former president himself. “We request for support from the public, the opposition and all other stakeholders.”

Sri Lanka’s opposition leader Sajith Premadasa is pushing to build support in parliament to change the constitution and remove the Rajapaksa family from power.

“We all have to swallow a bitter pill, or even several pills, because the consequences of irrationality throughout the past years have come home to roost,” Premadasa, leader of the main opposition Samagi Jana Balawegaya party, said in an interview with Bloomberg Television.

“It’s going to be a time of extreme austerity,” he added. “And people of Sri Lanka must comprehend this reality. But if we take these bold steps, we can overcome all the challenges, all the obstacles that we face.”

Source: Al Jazeera, News Agencies