International Monetary Fund has Started Discussions with Sri Lankan Government on Loan ProgramMay 20, 2022
A recent bulletin issued by IMF suggests that the talks about a new loan contract with the government of Sri Lanka were conducted successfully recently. It is worth mentioning that the people of Sri Lanka are going through one of the worst economic crises in history. Meanwhile, World Bank has postulated that it is working on an urgent relief package for the region.
The 22 million population of the island nation that sits next to North India has been crushed under massive federal debt. The imports of the country have dropped dangerously low, and the government is unable to maintain national reserves to support the local currency. Government institutions are unable to provide a steady stream of electricity, food, water, medicine, and other necessities to the citizens.
Sri Lankan FM Visits Washington to Hold Meetings with IMF and World Bank
The government of Sri Lanka needs to take urgent steps to take the country out of the famine-like economic crisis. Sri Lankan Finance Minister Ali Sabry recently visited Washington to have meetings with representatives from IMF and World Bank. On the other hand, the government has also appealed to India. The Indian government has held due payments on the external debt valued at $51 billion.
The Sri Lankan dire economic condition is attributed to the current political leadership. Mahinda Rajapaksa is thought to be in cahoots with the government of the United States to maintain his power and influence in the country. The people of Sri Lanka are out on the streets, and they are protesting against the current political regime that has driven the region to a devastating condition.
World Bank has agreed to release an immediate $10 million relief package. On the other hand, the IMF announced a $500 million aid after meeting with Sabry in Washington. IMF has agreed to lend the money by imposing restrictive financial constraints on the country by claiming that the nation should follow a guided and tailored economic policy to ensure macroeconomic stability.
Sabry told the media that IMF is pushing for the classic Extended Fund Facility lending contract. However, he claimed that the program requires a seed fund of $3 to $4 billion as a retainer. IMF is putting the Sri Lankan loan agreement on the same scale as the Colombo sponsorship, which will lead to critical rounds of negotiations with powers like China and other big creditors of the country.