IMF to visit Sri Lanka on Wednesday to assess debt
A team of the International Monetary Fund (IMF) will be visiting Sri Lanka this week to assess the island nation's total external and internal debt. The team will resume aid talks with a bankrupt Colombo, days after they were interrupted by civilian protests. The island nation, in April this year, defaulted on $51 billion in foreign debt.
Why is this important?
Sri Lanka is witnessing record inflation and a food and fuel shortage due to a long-term financial crisis that has left the nation bankrupt. The nation's economy has been hit by the COVID-19 pandemic and the Russia-Ukraine crisis, leaving it with $51 billion in foreign debt. After mass civilian protests, former President Gotabaya Rajapaksa resigned and Ranil Wickremesinghe was chosen as the new chief.
IMF to resume discussions for monetary aid
In a statement released earlier this week, the IMF said they will visit Colombo between August 24-31 to continue discussions on economic and financial reforms and policies. The crisis-based lender hopes to make progress on a prospective IMF Extended Fund Facility (EFF) arrangement in the near future. The formal discussions about a new package for the cash-strapped nation began in June.
What else did the IMF say?
Expressing concern about Sri Lanka's ability to return any loans, IMF said, "Because Sri Lanka's public debt is assessed as unsustainable, approval by the IMF Executive Board of the EFF program would require adequate assurances by Sri Lanka's creditors that debt sustainability will be restored."
Debt restructuring talks with World Bank next month
IMF's visit will come close to the debt restructuring talks with the World Bank scheduled for next month. The total debt of the island nation is around $97 billion, of which $51 is to Japan, China, the Asian Development Bank, and India. President Wickremesinghe is hoping to seek around $2 to 3 billion. Mismanagement by the Rajapaksas increased Sri Lanka's economic woes.
What has affected Sri Lanka's economy?
According to experts, since Sri Lanka has more debt than its GDP, and because its foreign exchange (forex) reserves have dwindled to $1.82 billion in July 2022, the island nation will find it hard to come out of the crisis anytime soon. Colombo's main forex earner is tourism, which has been hit badly by the COVID-19 pandemic and global political crisis.
'Former president must be tried for misuse of funds'
Sri Lanka's main opposition party on Sunday said that Rajapaksa must be tried for allegations of misuse of funds. The Samagi Jana Balawegaya said that the former President can return to the country but does not have legal immunity anymore. "He should face trials and must be penalized if found guilty," politician Ajith P Perera said.
