Sri Lanka Hopes to Seal IMF Deal by July as PM Outlines Revival Plan of ‘Collapsed Economy'

Prime Minister Ranil Wickremesinghe, who took charge following Mahinda Rajapaksa's resignation in May, has described the current situation as “far more serious” than a mere shortage of fuel, gas, electricity, and food. The nation has $51 billion in foreign debt and is presently negotiating with several countries to support its economy.

Sri Lanka Prime Minister Ranil Wickremesinghe has expressed hope hat he'll secure interim short-term loans from friendly countries and multilateral institutions such as the World Bank and Asian Development Bank before finalizing an agreement with the International Monetary Fund (IMF) by the end of July.

On Wednesday, Wickremesinghe revealed a slew of measures, including a donor conference with China, India, and Japan, to find a way out of its worst economic crisis in decades.

“It is no easy task to revive a country with a completely collapsed economy, especially one that is dangerously low on foreign reserves…In order to create the foundation for the path ahead, we will put forward an interim budget in August 2022 for the remainder of the period. The budget for 2023 will be presented in November,” the prime minister said in the parliament.

The Sri Lankan government has also planned several new legislations to strengthen the economy.

Sri Lanka has received $4 billion in loans from India, and it will negotiate with a visiting Indian team to seek more funds to import commodities with immediate needs. A group from the US Treasury Department will arrive on June 27 in the island nation.

“Parallel to this, we will organize a credit aid conference which will be led by India, Japan and China, our main lending countries,” the prime minister said, admitting the processes have been delayed over “conflicts and disagreements” in the recent past.

The Sri Lankan government has also been negotiating with oil producers to import 100,000 MT of LPG utilizing a World Bank loan of $70 million. Currently, Sri Lanka requires $550 million to meet its monthly fuel needs.

Sri Lanka is facing its worst economic crisis since 1948, caused by depleting foreign exchange reserves triggered by the COVID-19-induced lockdown. Tourism and remittances from its citizens working abroad are the two most significant contributors to the foreign exchange.

The government has been unable to import fuel, food, and other essential goods, which has triggered unrest, leaving nine people dead and over 230 injured in May.

Protesters accuse President Gotabaya Rajapaksa and his family members, who were also part of the cabinet until April, of mishandling the economy. Members of the Gotabaya family resigned from the cabinet to assuage public anger.