Sri Lanka’s President Says IMF Deal Delayed Over ‘Unrest’, Warns IMF Funds Won't Solve Crisis

The World Food Programme (WFP) warned this month that more than six million Sri Lankans, or nearly a third of the country's population, remain “food insecure” and the situation is likely to worsen in coming weeks.

The deal for an Extended Fund Facility (EFF) between the International Monetary Fund (IMF) and the Sri Lankan government has been delayed because of “unrest” in the south Asian nation this month, President Ranil Wickremesinghe said in a speech in the country's capital Kandy on Saturday evening, according to local media.

Under the EEF, Sri Lanka is seeking nearly $4Bln from the IMF to meet its import requirements for the coming months. An IMF delegation visited Sri Lanka in June to finalize the terms of the agreement.

In his first speech after assuming the presidency on 20 July, Wickremesinghe revealed that the deal with the IMF has now been “pushed back” to September. He said that the agreement was originally set to be reached by August.

Wickremesinghe also warned that the IMF deal won’t fully resolve the country’s economic woes and that the Indian Ocean nation needed to find other means to pay back its creditors, which include Japan, China and mainly western private bondholders. Beijing accounts for around 10 percent of Sri Lanka's overall debt, the central bank governor has said.

The Washington-based lender said this week that it would resume negotiations with the Sri Lankan authorities, after another round of protests earlier this month culminated in then President Gotabaya Rajapaksa fleeing the country on 12 July.

The private residence of Wickremesinghe was torched by anti-government protests, who also took over the official residence of the president as well as the presidential secretariat.

Rajapaksa resigned from the presidency after reaching Singapore from the Maldives.

A parliamentary vote on 20 July resulted in Wickremesinghe being shifted from his position as prime minister and being sworn in as the new president with the support of MPs from Rajapaksa’s Sri Lanka Podujana Peramuna (SLPP).

Facing its worst economic crisis since independence in 1948, in April Sri Lanka suspended its foreign debt payments to the tune of $51Bln.

The crisis, caused by a balance of payments (BoP) crisis because of diminishing forex reserves, has caused unprecedented shortages of fuel, food and medicines, all of them imported to meet the needs of the population of 22 million.

The government last month banned the import of fuel for a year, only allowing select companies to buy petrol and diesel from abroad. The authorities have also imposed strict rationing to preserve fuel.

Consequent to widespread shortages, the inflation peaked at more than 60 percent for the month of July, according to a statement from the Department of Census and Statistics on Saturday.