1030177-sri-lanka-political-crisis

Colombo: Finance Minister Ali Sabri said on Saturday that Sri Lanka would need about $3 billion in external aid over the next six months to help restore supplies of essential goods, including fuel and medicine.

of 22 million people The island nation has been affected by power cuts and shortages, Which has pulled protesters into the streets and put President Gotabaya Rajapaksa under increasing pressure.

 

“It’s a very difficult task,” Ali Sabri told Reuters, referring to finding $3 billion in bridge financing the country is set to hold talks with the International Monetary Fund (IMF) this month.

The country will restructure international sovereign bonds and seek a moratorium on payments and is confident it can negotiate with bondholders worth more than $1 billion, due in July.

 

“The whole effort is not to go for a hard default,” Sabri said. “We understand the consequences of a hard omission.”

Analysts at JP Morgan this week estimated Sri Lanka’s gross debt servicing to be $7 billion this year, with a current account deficit of about $3 billion.

 

The country has outstanding international sovereign bonds, central bank data showed, and foreign reserves of $1.9 billion at the end of March.

“The first priority is to see that we get back to the normal supply channel in terms of fuel, gas, medicines … and electricity to address the revolt of the people,” Sabri said.

‘Sense of Faith’

Anti-government protests have been raging across the island for days, with at least one violent turn in the commercial capital of Colombo, threatening the country’s lucrative tourism industry. Thousands of protesters gathered near the President’s beach office in Colombo on Saturday, making it the biggest show of public outrage in recent days.

Sabri said he would lead a delegation of Sri Lankan officials to begin talks with the IMF on April 18 and select financial and legal advisers within 21 days to help the government restructure its international debt.

“Once we get to them, the first thing that comes to mind is a sense of confidence in the entire international monetary community that we are serious,” he said.

“We are transparent, we are willing to engage.”

On Friday, a new central bank governor raised interest rates by an unprecedented 700 basis points to spur rocket inflation and stabilize the economy.

Sri Lankan officials will also reach out to rating agencies, Sabri said, as the country seeks to gain access to international financial markets after the 2020 shutdown due to several rating downgrades.

He said the government would raise taxes and fuel prices within six months and try to reform the loss-making state-owned enterprises.

These measures were among the key recommendations in the IMF review of Sri Lanka’s economy released in early March.

“These are very unpopular measures, but we need to do this to get the country out of it,” Sabri said.

‘Friend of all’

He said Sri Lanka would seek another $500 million loan from India for fuel, which would be enough for about five weeks.

The government will also seek support from the Asian Development Bank, the World Bank and bilateral partners including China, the United States, the UK and countries in the Middle East.

“We know where we are, and the only thing is to fight back,” Sabri said. “we have no choice.”

Discussions are underway with China on a $1.5 billion line of credit, up to $1 billion in syndicated loans and a request from the Sri Lankan president in January to restructure some of the debt.

“Hopefully, we will get some relief, which will help till a large amount of water comes,” he said.

Beijing and New Delhi have long been battling for influence over the island at India’s southern tip, with the country drawing closer to China under the powerful Rajapaksa family.

But in recent weeks, as the economic crisis deepened, Sri Lanka has become heavily dependent on India’s aid ,

“We are a neutral country,” Sabri said. “We are all friends,” he said.

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