Other major lenders are the Asian Development Bank, Japan and China.
Due to the severe economic crisis in Sri Lanka, people are protesting against President Gotabhaya Rajapaksa.
A state of emergency has been declared in Sri Lanka, home to about 2.2 crore people.
The situation in Sri Lanka is due to the Ukraine-Russia war, the depletion of foreign exchange reserves and the challenge posed by the Corona. Mostly Sri Lanka is dependent on imports.
The government does not have enough money to import the essentials.
As a result, there is a severe shortage of fuels, including petrol and diesel.
The prices of all essential commodities like milk, vegetables and pulses have gone up.
The power outage lasts from 8 a.m. to 13 p.m. The cause of this crisis began many years ago.
This situation is due to the economic mismanagement and the budget deficit along with the current account deficit.
But a few months before the COVID-19 epidemic that hit Sri Lanka’s economy hard, Rajapaksa promised tax cuts during the 2019 election campaign. That is also the reason for the situation in Sri Lanka today.
The country’s lucrative tourism sector and the remittances of foreign workers have been reduced by the corona. Sri Lanka had planned to access international credit institutions under the Sri Lanka Debt Management Program.
However it went unfulfilled. Under these circumstances, foreign exchange reserves fell by almost 70 per cent in two years.
The Rajapaksa government’s decision to ban all chemical fertilizers in 2021 also affected the country’s agriculture sector. Moreover, it caused a decline mainly in the paddy crop.
However, the ban on chemical fertilizers was lifted. What is Sri Lanka’s foreign debt? As of February, the country had only $ 2.31 billion in reserves. But by 2022 it will have to repay $ 4 billion in debt.
This includes the $ 1 billion International Shaving Bond (ISB), which matures in July. ISBs account for the largest share of Sri Lanka’s external debt, contributing $ 12.55 billion.
Other major lenders are the Asian Development Bank, Japan and China.
In a country economic review released last month, the IMF said public debt was “unsustainable” and that foreign exchange reserves were almost insufficient to pay off term debt.
Who is helping Sri Lanka?
For months, Rajapakse’s administration and the Central Bank of Sri Lanka (CBSL) experts have been opposed to seeking IMF help.
However, opposition parties and economists continued to point out that this situation would occur. But after oil prices soared following Russia’s invasion of Ukraine in late February, the government finally launched a plan to approach the IMF in April.
An IMF spokesman said discussions with the Sri Lankan authorities on a possible loan scheme would begin in the coming days.
Meanwhile, Rajapaksa has sought help from China and India. Especially seeking fuel help.
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Sri Lanka and India have signed a $ 1 billion loan agreement to import essential commodities, including food and medicine. And the Rajapaksa government has demanded at least $ 1 billion from India.
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