Sri Lanka, which is on the verge of bankruptcy, is grappling with an unprecedented economic turmoil, the worst since its independence from Britain in 1948
Protesters take to the streets in Sri Lanka to demand the resignation of President Rajapaksa: AFP
Washington/Colombo: Sri Lankan Finance Minister Ali Sabry met with IMF Managing Director Kristalina Georgieva in Washington and made a request for a Rapid Financing Instrument (RFI) amid the nation’s unprecedented economic crisis islander, media reported Tuesday.
The RFI, which is available to all member countries of the International Monetary Fund (IMF), provides rapid, low-access financial assistance to member countries facing an urgent balance of payments (BoP) need, without the need to have a full program in place.
In another setback for Sri Lanka, global ratings agency Moody’s downgraded Sri Lanka’s ratings on Monday after the crisis-hit government in Colombo suspended external public debt repayments, which will trigger a series of payment defaults.
Sri Lanka, which is on the verge of bankruptcy, is grappling with an unprecedented economic turmoil, the worst since its independence from Britain in 1948.
Finance Minister Sabry is in the United States for the annual spring meetings of the International Monetary Fund (IMF) and the World Bank.
He met IMF Managing Director Georgieva on Monday at IMF headquarters here, News First Sri Lanka reported.
The IMF welcomed the steps already taken by the finance minister to alleviate the current financial situation in Sri Lanka, he said.
The IMF has also assured its fullest support to Sri Lanka and a positive response has also been received to expedite the process of strengthening support to Sri Lanka, according to the report.
Finance Minister Sabry has requested an RFI from the IMF. The IMF informed Sabry that India had also made representations on behalf of Sri Lanka for a request for information, he said.
It was communicated that the IMF will consider the special request made although it is outside the usual circumstances for issuing an RFI, according to the report.
Ratings agency Moody’s Investors Service downgraded the Sri Lankan government’s long-term currency issuer rating and senior unsecured debt rating from Caa2 to Ca. The outlook is stable.
Given the low level of foreign exchange reserves, aggravated by mounting balance of payments pressures with rising fuel and food prices and the slow recovery in tourism and foreign direct investment inflows, Moody’s believes that losses to private sector creditors resulting from possible debt restructuring are likely to be significant and exceed the limited levels of loss consistent with the previous Caa2 rating, according to the report.
This assessment further reflects governance weaknesses in the ability of the country’s institutions to take action that decisively addresses the very low adequacy of foreign exchange reserves and very low debt affordability, thus contributing to the loss in the event of default, at least in line with the precedents of other defaulting sovereigns, he added.
As the island nation experiences the worst economic crisis in its history, massive anti-government protests are taking place across the country over the government’s failure to address the crisis.
With long queues for fuel, cooking gas, shortages of basic necessities and long hours of power cuts, the public has been suffering for months.
With the economic crisis and shortage of foreign exchange, a $500 million Indian credit line for fuel imports has provided a lifeline to the island nation.
India recently announced a $1 billion line of credit to Sri Lanka as part of its financial assistance to the country to tackle the economic crisis after a previous $500 billion line of credit. in February to help him buy petroleum products.
President Gotabaya Rajapaksa has defended his government’s actions, saying the currency crisis was not his fault and that the economic downturn was largely due to a pandemic, the island nation’s tourism revenue and remittances. incoming funds dwindling.