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Sri Lanka and IMF Reach Agreement on Emergency Loan

Sri Lanka and the IMF have agreed on an emergency loan, sources say, for the crisis-wracked island nation, where people have faced shortages of food and basic goods


Sri Lanka and the IMF have reached an agreement on an emergency loan, sources said on Wednesday.
People, including farmers, queue up outside a fuel station, amid the country's worst economic crisis, in Kilinochchi district, Sri Lanka July 28, 2022. Photo: Devjyot Ghoshal, Reuters.

 

Sri Lanka and the International Monetary Fund (IMF) have agreed on an emergency loan for country, sources said on Wednesday.

The debt-laden island nation had sought up to $3 billion from the global lender as it struggles with its worst-ever economic crisis.

Sri Lankans have faced acute shortages of basic goods and sky-high prices for months.

Spokespersons for the IMF and the Sri Lankan government did not immediately respond to requests for comment, but multiple sources said the latest news would be announced on Thursday.

Sri Lankan President Ranil Wickremesinghe, who has announced an interim budget for the rest of the year, told parliament on Tuesday that talks with the IMF had reached the “final stage”.

Staff-level agreements are typically subject to the approval of the IMF management and its executive board, after which the recipient nations get access to funds.

A visiting IMF team held talks with Sri Lankan government officials, including the treasury secretary, late into the night on Tuesday to address concerns on the political front, the sources said. Most of the technical details had been agreed to beforehand.

 

ALSO SEE: Is Sri Lanka a Victim of China’s Debt-Trap Diplomacy?

 

 

Bond Payment Defaults

The country of 22 million was plunged into political crisis last month when then-president Gotabaya Rajapaksa fled after a popular uprising against an acute shortage of basic goods and sky-high prices.

Rajapaksa was replaced by six-time prime minister Wickremesinghe, who also heads the finance department and held several rounds of talks with the IMF team.

The country is also trying to restructure its debt of about $29 billion, with Japan expected to lead talks with other main creditors such as China. Sri Lanka also plans to soon reach out to private creditors that hold the majority of its $19 billion sovereign bonds to start restructuring talks.

Sri Lanka missed interest payments on bonds due on June 3, June 28, and July 18, and a principal payment due on July 25, according to rating agency S&P Global.

The Covid-19 pandemic disrupted Sri Lanka’s tourism-reliant economy and slashed remittances from workers overseas.

The damage was compounded by rising oil prices, populist tax cuts and a seven-month ban last year on imports of chemical fertilisers that devastated agriculture.

 

  • Reuters with additional editing by Jim Pollard

 

 

ALSO SEE:

Sri Lanka President Flees, Protesters Storm PM’s Office

Sri Lanka Hikes Interest Rates to 21-Year High to Stem Inflation

India Pledges Deeper Support for Struggling Sri Lanka

Sri Lanka Creditors Form Group for Debt Restructuring Talks

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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