Sri Lanka hopes to reach first agreement with IMF for aid

COLOMBO, Sri Lanka (AP) — Sri Lanka’s central bank chief said Thursday he hopes the embattled island nation will reach a preliminary agreement that could lead to a bailout with the International Monetary Fund when Financial institution officials are reportedly visiting Sri Lanka later this month.

The Indian Ocean nation is facing its worst economic crisis and has been negotiating with the IMF while government leaders in Colombo have declared Sri Lanka effectively bankrupt.

Nandalal Weerasinghe, Sri Lanka’s central bank governor, said he hoped IMF officials and the Sri Lankan government could “finalize and reach agreement at staff level” on the policy package during their meetings. meetings.

Sri Lanka announced in April that it was suspending foreign loan repayments. Its total external debt is $51 billion, of which it must pay $28 billion by 2027. The country has declared that it must restructure all of its debt.

Weerasinghe told reporters on Thursday that the deal sought with the IMF would give them “a clear picture of debt sustainability and the debt targets we need to achieve over the next 10 years.”

Once an agreement is reached, Weerasinghe said, Sri Lanka will approach sovereign bondholders and other external creditors.

“We hope that all of our creditors will support Sri Lanka once they see the solid macroeconomic program approved by the IMF,” he said.

Sri Lanka’s economic collapse has sparked a political crisis, with widespread anti-government protests erupting across the country. Massive public protests toppled Sri Lankan President Gotabaya Rajapaksa last month.

Rajapaksa fled the country after thousands of protesters stormed his official residence and he resigned in exile. He fled first to the Maldives, then to Singapore and is now in Thailand.

Protesters blamed Rajapakasa and his powerful family for years of mismanagement and corruption that bankrupted the nation and led to unprecedented shortages of essential imports like fuel, medicine and cooking gas.

Sri Lanka’s new president, Ranil Wickremesinghe, said two weeks ago that his government had started negotiations with the IMF on a four-year bailout and had begun finalizing a debt restructuring plan.

However, Wickremesinghe also said negotiations with the IMF had been difficult due to Sri Lanka’s bankruptcy and that an early August target for a deal with the agency was not possible. He is now expected in September due to social unrest in the country.

Wickremesinghe was elected president last month to complete the remainder of Rajapaksa’s five-year term, which ends in 2024.

Wickremesinghe’s government is preparing a national policy roadmap for the next 25 years that aims to reduce public debt and transform the country into a competitive export economy.

Wickremesinghe stressed that Sri Lanka needs long-term solutions and a solid foundation to stop a recurrence of economic crises.

Two weeks ago, he said that the difficulties had eased somewhat with the reduction of power cuts, the supply of fertilizer for the crop and the improvement of the distribution of cooking gas.

But many people complain that the price hikes for most essentials are unbearable.

The prices of most basic necessities have tripled in recent months and most people are struggling to afford basic necessities. About 70% of Sri Lankan households surveyed by UNICEF in May said they had reduced their food consumption. Many families depend on government rice donations and charitable donations.

Separately, on Thursday, police fired tear gas and used water cannons to disperse university students who were taking part in a protest march in the capital Colombo, demanding Wickremesinghe’s resignation. Local TV channels showed police arresting some of the protesters.

Protesters accused Wickremesinghe of being a surrogate for Rajapaksa and trying to suppress people’s rights to protest.

They marched along Colombo’s main roads, shouting slogans and carrying banners that read ‘Go Ranil Go get lost with ALL Rajapaksas’, ‘Stop the repression and ‘Release all arrested protesters’.

Since his election, Wickremesinghe has authorized the military and police to violently dismantle protest camps in Colombo and arrest those they identify as having entered the president’s official residence and other public buildings.

Rights groups have accused the Sri Lankan government of using emergency laws to harass and arbitrarily detain protesters demanding political reform and accountability.

However, Wickremesinghe said that although the protests started peacefully, groups with political interests later took over and turned violent, citing the burning of dozens of ruling party politicians’ homes in May.

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