COLOMBO (Sri Lanka) -- Sri Lanka's talks with the International Monetary Fund for a bailout are more complicated and difficult because the country is a bankrupt country, said the prime minister Tuesday.
Ranil Wickremesinghe, Prime Minister, told lawmakers that recent talks with the visiting IMF mission were productive but not as simple as they used to be.
This South Asian island nation is currently in the worst economic crisis it has ever experienced. The country is facing severe shortages in essentials such as food, fuel, fuel and medicines. People are forced to wait in long lines for limited supplies. The government closed schools and required employees to work remotely from their homes, except for those who are essential services workers.
"Our country has had talks with IMF many times before. This time, however, the situation is very different to all previous ones. Wickremesinghe stated that in the past we had held discussions as a country in development.
"But the situation is now different. As a bankrupt country, we are participating in the negotiations. He explained that we are now facing a more complicated and difficult situation.
Wickremesinghe stated earlier that an agreement preliminary on a bailout was submitted to the IMF board of directors for approval. "But because of the bankruptcy situation in our country, we must submit separate plans on our debt sustainability to them. Only after they have approved the plan, can we come to an agreement at staff level. He said that this is not an easy process.
He stated that Sri Lanka's legal financial advisors are currently working on a report on debt sustainability to be submitted in August.
Wickremesinghe stated that discussions are ongoing with India, Japan, and China in order to create an aid consortium after a staff-level agreement is reached with the IMF.
Sri Lanka has suspended the repayment of foreign debts amounting to $7 billion due this year, as its foreign exchange rates fell to record lows. Sri Lanka's foreign debt totals $51 billion. $28 billion must be repaid before 2027. This is an average repayment of $5 billion per year.
People are frustrated and have been staging street protests for several months. They often fight with police at petrol stations and among themselves.
Wickremesinghe stated that the Central Bank forecasts an economic contraction of 4%-5% this year. According to the IMF, Sri Lanka's economy is expected to shrink by 6% to 7.
The pandemic in Sri Lanka has ravaged the economy, compounding long-standing economic problems. Wickremesinghe stated that the country's GDP dropped to $76.2 billion in 2021 from $94.4 billion in 2018. It won't recover to its 2018 to 2026 levels. Wickremesinghe stated that the government had one goal: minus 1% growth by next year.
