IMF bailout for Sri Lanka 3 months away

COLOMBO: An International Monetary Fund bailout package for crisis-hit Sri Lanka could take up to three months to arrive, the country’s central bank chief said in an AFP report.

Central bank chief Nandalal Weerasinghe said he was hopeful of a staff-level agreement with the IMF within two months, but a final deal would take another three weeks.

“The key objective is to achieve debt sustainability before an IMF program,” Weerasinghe said, adding that experts will be named shortly to renegotiate Sri Lanka’s external debt estimated at $51 billion.

Two weeks ago, Sri Lanka announced it was defaulting on its foreign debt after running out of foreign exchange to import even the most essential supplies.

Weerasinghe told reporters in Colombo that he expected about $3.0 billion from an eventual International Monetary Fund program, but the country would first have to carry out painful reforms.

“The current tax structure is not sustainable. We must go back at least to the level of taxation we had before 2019,” he said, referring to a series of tax breaks implemented by Rajapaksa in an election pledge that propelled him to power in November 2019, but devastated state revenue.

Official data released Friday showed year-on-year inflation at 29.8 percent in April, a seventh consecutive record-high — five times above the 5.7 percent in September.

Weerasinghe warned inflation could jump even more as fuel and food prices increased sharply with the local currency losing over 40 percent of its value in a month.

Census and statistics department figures showed food inflation in April was also a record 46.6 percent higher, up from 30.2 percent in March and 9.0 percent a year ago.

A World Bank spokesperson told AFP that talks were underway to “leverage” money from ongoing projects and “repurpose” them to buy medicines and food for school children.

A total of $10 million from the ongoing Covid-19 project were “being released directly to suppliers” for the immediate purchase of essential medicines and medical supplies to address acute shortages in the country, the spokesperson said.