In an interview, Sri Lanka’s finance minister said the country needs $3 billion in the next few months to avoid a crisis.
This is how it looks: COLOMBO (Reuters) – Sri Lanka’s finance minister told Reuters on Saturday that the country will need about $3 billion from outsiders in the next six months to help restore supplies of essential goods, like fuel and medicine, and to help the country deal with a severe economic crisis.
The island nation of 22 million people has been hit by power outages for a long time, with drugs, fuel, and other things running low. This has led to angry protests and put President Gotabaya Rajapaksa under more and more pressure.
There will be no easy way to get $3 billion in bridge financing as Egypt prepares to meet with the International Monetary Fund (IMF) this month. In his first interview since taking office this week, Finance Minister Ali Sabry said it was a Herculean task.
The South Asian island nation plans to restructure its international sovereign bonds and ask for a payment suspension. It is confident that it will be able to work out a deal with bondholders for a $1.25 billion payment in July.
“The whole point is not to go through with a hard default,” Sabry said. “We know what would happen if we went into hard default.”
They say that Sri Lanka’s gross debt service this year will be about $7 billion, and the current account deficit will be about $3 billion.
According to data from the central bank, the country had $1.93 billion in foreign reserves as of the end of March. The country has $12.55 billion in bonds from other countries.
Sabry said, “The first thing we need to do is get back to the normal supply channel for fuel, gas, drugs, and electricity so that the people’s uprising can be dealt with,” Then we can deal with the people.“
‘A SENSE OF TRUST.”
Anti-government protests have been going on across the island for days, and at least one of them has turned violent in the country’s commercial capital, Colombo. This has hurt the country’s tourism industry, which was devastated by the COVID-19 pandemic.
Sabry said, “We respect your right to protest, but we don’t want you to use violence, because it’s not good for anyone.”
During the protests, “our tourism, which was going well in February with 140,000 tourists coming in, has been very bad.”
Sabry said he will lead a group of Sri Lankan officials to Washington on April 18 to start talks with the IMF. During the next 21 days, financial and legal advisers will be chosen to help the government restructure its debt from outside the country.
First, “there is a sense of confidence in the whole world’s money system that we are going to do this,” he told them. “We are honest, and we’re willing to talk.”
On Friday, a new central bank governor raised interest rates by an unprecedented 700 basis points in an effort to control rising prices and stabilise the economy. This was the first time the rate had been raised this high.
People in Sri Lanka’s government will also try to get in touch with the rating agencies, Sabry said. The country hasn’t been able to get into international financial markets since 2020 because of a lot of downgrades.
By the end of six months, Sabry said, the government will raise taxes on goods and fuel, and it will try to reform state-owned businesses that are losing money.
Key recommendations from an IMF report on Sri Lanka’s economy came out in early March. These were some of the most important.
This is what Sabry said: “These are very unpopular measures, but we need to take them for the country to come out of this.” Because there’s a choice: Do you do that, or do you keep going down the drain?
A friend of all means:
Another $500 million credit line from India would be enough for about five weeks’ worth of fuel needs, Sabry says.
Besides that, the government would also look for money and help from other countries, like the Asian Development Bank and the World Bank. They would also look for help from bilateral partners, like China and the United States.
With a blue T-shirt and jeans, Sabry looked relaxed. “We know where we are and we have to fight back,” he said. “We have no other choice.”
A $1.5 billion credit line, a syndicated loan of up to $1 billion dollars, and a request from Sri Lanka’s president in January to restructure some debt are all being talked about with China.
People in Sri Lanka and the country should be able to get some help, Sabry said. This would help keep the country and the Sri Lankan community going until more money comes in.
As the Rajapaksa family became more powerful, India moved closer to China. For a long time, Beijing and New Delhi have been fighting for control of an island off the southern tip of India.
However, as the economic crisis has gotten worse, Sri Lanka has been relying more on help from India as it has been getting less money.
“We are a country that doesn’t have an aside. We are friends with everyone. “People who used to be Sri Lanka’s justice minister say Sabry, a lawyer who used to be. People think that goodwill will come in handy at this time.
