Amid the worsening economic crisis, Sri Lanka has written to the International Monetary Fund (IMF) seeking “technical support” in tackling the ongoing crisis, confirmed Finance Minister Basit Rajapaksa, after the government kept avoiding the IMF option for months amid domestic pressure. The move came as the government struggles to keep its forex stable.

“We have written to them and sought specialist advice from them…the IMF will give us advice about things that we do not know,” Rajapaksa was quoted as saying by Economynext. “Whether we take the advice is another matter,” he added. Significantly, the finance minister revealed that they had also been seeking funds from Japan.

Additionally, on Wednesday, the government signed an agreement with India’s EXIM Bank for a $500 million credit line—part of the 1.5 billion assistance package announced by New Delhi last month—for fuel purchase.

As the foreign exchange crisis worsened over the past few months, the government was struggling to form a consensus on approaching the IMF for assistance, as several members within Cabinet, besides opposition leaders, had been fiercely opposing the IMF option.    

Just two weeks back, Sri Lankan Central Bank Governor Ajith Nivard Cabraal, in an interview to CNBC, said that the government didn’t need to approach the IMF if it was successful in finding government-to-government deals and central bank solutions.

Sri Lanka’s economy was struggling even before the pandemic. However, the pandemic– and the resultant subsequent shock to the tourism industry, which used to bring in around $4 billion annually— coupled with the high global prices of fuel and commodities exacerbated the crisis.

In November last year, the country’s forex reached $1.5 billion and rose to $3 billion in December. Fitch Ratings and S&P both had recently downgraded the country’s sovereign rating. [Read More]

Last year, the island country had approached India, seeking assurance in fulfilling its energy, fuel, and food needs. Following this, New Delhi announced $1.5 billion lines of credit for Sri Lanka. [Read More]

(SAM)