Colombo, June 20 (EFE).- An International Monetary Fund (IMF) team arrived in Sri Lanka Monday to discuss a bailout package for the island nation, which is experiencing its worst financial crisis in decades.
The IMF said its team would be in Colombo from June 20 to 30 to continue discussions on an economic package that might be backed up by a loan, building on the progress made during the virtual meeting from May 9 to 24.
“We reaffirm our commitment to support Sri Lanka at this difficult time, in line with the IMF’s policies,” the global lender said.
During the 10-day visit, the IMF team will hold negotiations with the Central Bank of Sri Lanka officials, President Gotabaya Rajapaksa, and Prime Minister Ranil Wickremesinghe, who is also the finance minister.
The island nation, running out of gasoline, has requested a rescue from the IMF after defaulting on debt repayment and seeing its foreign currency reserves plummet to new lows.
“(It) is the second leg of the staff-level consultation between the Sri Lankan government and the IMF. A virtual consultation took place earlier. Since then, there have been several contacts and discussions between the (two),” political analyst Aruna Kulatunga told Efe.
The government, he said, anticipated the IMF to finish their staff consultation and move up the decision-making tree to the board.
“It is possible that Sri Lanka may be afforded a rapid financing facility that can be awarded at the staff level. However, the government cannot expect any IMF facility to come through till the end of August,” Kulatunga said.
The global lender, after the virtual conversations in May, said it was “deeply concerned” over the impact of the crisis on Sri Lankans, especially the poor and vulnerable groups.
“Since Sri Lanka’s public debt is assessed as unsustainable, approval by the executive board of an IMF-supported program would require adequate assurances that debt sustainability will be restored,” an IMF statement said.
The island is also in talks with lender countries and other financial organizations about providing bridge financing to help it implement a successful debt-restructuring plan.
Sri Lanka was severely harmed by the government’s economic mismanagement and policy mistakes, as well as the crippling Covid-19 lockdown, which hurt the country’s once-thriving tourism industry and remittances from abroad.
The government’s dubious policies included pegging the dollar, which sparked a thriving underground market and prevented registered banks from getting much-needed foreign currency.
The issue was exacerbated by President Rajapaksa’s unexpected chemical fertilizer ban in April of last year.
The production of critical commodities such as the country’s staple rice has halved this harvesting season, per government sources.
To avoid a probable food crisis, the government is pushing individuals to cultivate as much as they can.
Meanwhile, due to a persistent fuel shortage, the country ordered a two-week suspension of government facilities and schools.
In April, Sri Lanka’s inflation rate was 33.80 percent, per central bank statistics. The country owes more than $50 billion in foreign debt. EFE