Fast-track talks to aid bankrupt nation
Sri Lanka PM wants IMF programme in place by June
COLOMBO: Sri Lanka is looking to fast-track talks with the International Monetary Fund (IMF) and agree a loan by mid-june so that it can then approach other lenders for urgently needed funds.
The bankrupt nation will slash its budget expenditure to “bare bones” and hopes to break even or post a primary surplus of 1% of gross domestic product by 2025, Prime Minister Ranil Wickremesinghe said in an interview at his office in Colombo.
Even so, that would be smaller than the 2% surplus the IMF has sought, which could be a sticking point.
“We need to find the dollars. The IMF will not bring in the entire thing,” Wickremesinghe said. “But if we start with the IMF, it will be easier for others to help us.”
Wickremesinghe is seeking about Us$4bil (Rm18bil) this year, from the multilateral lender and creditors including China and Japan, to help pay for food and fuel.
Easing the shortages could be the first step to soothe public anger that has stoked inflation to almost 40% and triggered protests seeking the ouster of President Gotabaya Rajapaksa.
Wickremesinghe – who took on the additional role of finance minister on Wednesday – forecast that the economy will shrink 4% this year. He fears citizens will face hard times until February, including food scarcities due to a lack of fertiliser ahead of planting season.
Once an IMF deal is agreed, Wickremesinghe said he would seek debt restructuring from Beijing. Loans from China are almost equal to those from Japan, but Chinese debt carries higher interest rates, he said, without elaborating.
Sri Lankan dollar bonds due in 2030 fell for a fifth straight session on Wednesday to 37.8 cents, lingering deep in distress.
The extra yield investors demand to hold the sovereign debt over US Treasuries was more than 39 percentage points, according to Jpmorgan Chase and Co data.
While the debt talks continue, Wickremesinghe is also trying to contain anger against Rajapaksa.
Wickremesinghe has sent to the cabinet a newly drafted, so-called 21st amendment to the country’s constitution, which is expected to trim the wide-ranging powers of the president’s office.
The outcome of the amendments would follow discussions among lawmakers, Wickremesinghe said, adding that he was hoping for “the broadest possible support” among parties.
Sri Lanka’s Bar Association has already raised questions about the extent to which the amendments will scale back the sweeping powers that President Rajapaksa gave to his office shortly after he returned to power in 2019.
The new prime minister replaced the president’s older brother, Mahinda Rajapaksa, who quit on May 9 after violence erupted across the country, and is leading a so-called multi-party interim government that is hoped would bring political stability to the country.
— Bloomberg