On Wednesday, the crisis-ridden Sri Lankan Prime Minister announced that he will speak with the International Monetary Fund (IMF) and try to reach an agreement to get a new loan facility. “Discussions with the International Monetary Fund are currently the only alternative that is safe for us. Actually, this is our only choice. PM Ranil Wickremesinghe stated in a speech to the Sri Lankan Parliament that we must follow this course. After months of food, fuel, and energy shortages, Wickremesinghe claimed that his country’s debt-ridden economy had “collapsed” and that it was unable to even buy foreign oil.
Wickremesinghe lauded the assistance provided by India, however, he said, “financial assistance provided by India is not “charitable donations” and the island nation facing severe economic crisis must have a plan to repay these loans.” Sri Lanka has been facing the worst economic crisis since independence in 1948, leading to an acute shortage of essential items like food, medicine, cooking gas and fuel across the island nation.
“Following discussions with the Central Bank, Treasury, relevant government officials, professionals and experts this plan has already been formulated. I urge you to inform us of a better solution if available. In fact, if you are in possession of a practical and more favourable plan for the country we call on you to put it forward,” said the Sri Lankan PM. The PM said that an IMF team had arrived in Sri Lanka on Monday.
The nearly-bankrupt country, with an acute foreign currency crisis that resulted in foreign debt default, had announced in April that it is suspending nearly USD 7 billion foreign debt repayment due for this year out of about USD 25 billion due through 2026. Sri Lanka’s total foreign debt stands at USD 51 billion. The Indian credit lines since January this year have provided a lifeline to Sri Lanka amidst growing public dissent over the worsening economic conditions.
“Let me now in detail present to you the programme we have currently put into action. The majority of the cabinet was appointed by May 20. We began our programme from then onwards. First, we decided to revert back to the tax system we had in place in 2019. We then agreed to ensure a primary surplus in the national budget by 2025. Next, an IMF team on revenue and taxation visited Sri Lanka for discussions.
Wickremesinghe said next Monday, a team of representatives from the US Department of the Treasury will also arrive in Sri Lanka. We intend to enter into an official level agreement with the IMF by the end of July. He also laid out the plans to bring out the island nation from this crisis.
They presented us with the relevant report. On Monday, the main IMF team arrived in Sri Lanka and the talks with the group will continue for the next several days.” “We have concluded the initial discussions and we have exchanged ideas on various sectors such as public finance, finance, debt sustainability, stability of the banking sector and the social security network.
The Sri Lankan PM also highlighted the debt restructuring plan with IMF. He said, “We will together with the teams from Lazard and Clifford Chance do our utmost to complete the framework for this plan before the end of July. Considering this planned framework and the official level agreement it is expected that the Executive Board of the IMF will then arrive at its final decision.”
Representatives of the financial and legal advisory firms Lazard and Clifford Chance are now in Sri Lanka to assist us in our debt restructuring efforts. The framework for debt repayment restructuring is being formulated,” added Wickremesinghe. Explaining further, he said that parallel to holding talks with IMF, Sri Lanka will also organise a credit aid conference with India, Japan and China – the main lending countries to Sri Lanka. “We are also currently holding discussions with the World Bank, Asian Development Bank, the United States, other friendly nations and heads of state to secure interim short-term loans till we receive IMF support. We will be able to lay the foundation to ensure economic stability following the successful completion of these tasks. But this by no means will be the end. In fact, it will be the beginning of our journey. A new journey toward a stronger economy. We will then have to forge ahead with our plans to strengthen and create a new Sri Lankan economy,” said Wickremesinghe.
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