Colombo, Aug 20 (EFE).- The International Monetary Fund (IMF) will visit Sri Lanka next week to seek assurances from the nation’s creditors to grant a much-needed bailout package to tackle a raging economic crisis.
“IMF staff plans to visit Colombo during August 24-31 to continue discussions with the Sri Lankan authorities on economic and financial reforms and policies,” the global financial agency, based in Washington, announced in a statement on Friday.
Sri Lanka has turned to the IMF for a rescue plan as it faces the worst economic crisis in its history, sparked by a foreign exchange crisis and shortage of essential commodities.
With no foreign exchange, the government defaulted on its debt payments and struggled to import essential goods, including fuel.
Prices of essential commodities have skyrocketed as the economic meltdown snowballed into a political crisis.
The island nation, whose foreign reserves have dropped to around $1.8 billion, hopes to secure some $4 billion from the IMF that will allow it to restore fiscal balance.
The upcoming visit is aimed at making “progress towards reaching a staff-level agreement on a prospective IMF Extended Fund Facility (EFF) arrangement in the near term,” the IMF added.
Sri Lanka, which declared default on its foreign debt and requires tens of billions of dollars to meet its domestic and international debt commitments, urgently needs cash flows for basic goods such as fuel, medicine, and food, which have been in short supply in recent months.
“Because Sri Lanka’s public debt is assessed as unsustainable, approval by the IMF Executive Board of the EFF program would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored,” the agency added.
An IMF delegation visited the island two months ago for a round of negotiations with the Sri Lankan government, where economic instability has triggered a serious political and social crisis.
Although the authorities hoped for a positive outcome from the meetings held in mid-August, civil unrest plunged the country into chaos and led to the resignation of former President Gotabaya Rajapaksa in mid-July, putting the agreement on hold.
The administration of the current president, Ranil Wickremesinghe, elected on July 20 by parliament, has tried to bring the negotiations to a conclusion.
The Central Bank of Sri Lanka (CBSL) said this week that the negotiations were progressing well and they expected a preliminary agreement for a rescue package with the international financial agency by the end of August.
The approval of this agreement entails a series of deep structural reforms to reduce public spending and establish sustainable policies. EFE