- Seeks another $500 million from India for fuel
- Government priority to ensure the supply of basic necessities
- Raise taxes and fuel prices within six months
COLOMBO, April 9 (Reuters) – Sri Lanka will need around $3 billion in external aid over the next six months to restore supplies of essentials, including fuel and medicine, the country said on Saturday. Reuters Finance Minister Ali Sabry.
The island nation of 22 million people has been hit by power cuts and shortages that have drawn protesters to the streets and put President Gotabaya Rajapaksa under increasing pressure.
“It’s a Herculean task,” Sabry said in his first interview since taking office this week, referring to seeking $3 billion in bridge funding as the country prepares for negotiations with the Monetary Fund. International (IMF) this month.
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The country will seek to restructure international sovereign bonds and seek a moratorium on payments, and is confident it can negotiate with bondholders over a $1 billion payment due in July.
“The whole effort is not to go for a hard default,” Sabry said. “We understand the consequences of a hard default.”
JP Morgan analysts this week estimated that Sri Lanka’s gross debt service will stand at $7 billion this year, with a current account deficit of around $3 billion.
The country has $12.6 billion in international sovereign bonds outstanding, according to central bank data, and foreign exchange reserves of $1.9 billion at the end of March.
“The first priority is to ensure that we return to the normal route of supplying fuel, gas, medicine…and therefore electricity so that the popular uprising can be addressed,” Sabry said.
The IMF said on Saturday it had entered into technical-level dialogue with Sri Lanka’s finance ministry and central bank officials for a lending program, and was “very concerned” about the ongoing crisis. .
“We are committed to assisting Sri Lanka in accordance with our policies, and will engage in discussions on a possible program with senior policymakers in the days and weeks to come,” said Masahiro Nozaki, IMF mission chief for Sri Lanka. Lanka, to Reuters in a press release.
‘SENSE OF TRUST’
Anti-government protests have raged across the island for days, with at least one violent one in the commercial capital of Colombo, threatening the country’s lucrative tourist industry.
Thousands of protesters gathered near the president’s waterfront office in Colombo on Saturday, making it one of the biggest shows of public outrage in recent days.
Among the protesters were dozens of Muslims who sat in the middle of a blocked road to break their Ramadan fast and others who urged the president to stand down, shouting “Gota (Gotabaya) go home”.
Sabry said he would lead a delegation of Sri Lankan officials to Washington to begin talks with the IMF on April 18 and that financial and legal advisers would be selected within 21 days to help the government restructure its international debt.
“Once we go to them, the first thing is that there’s a sense of confidence across the international monetary community that we mean business,” he said. “We are transparent, we are ready to engage.”
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Sri Lankan authorities will also contact rating agencies, Sabry said, as the country seeks to regain access to international financial markets after being stuck due to multiple rating downgrades since 2020.
He said the government would raise taxes and fuel prices within six months and seek to reform loss-making state enterprises.
These measures were among the main recommendations of an IMF study on the Sri Lankan economy published in early March.
“These are very unpopular measures, but these are things we need to do to get the country out of it,” Sabry said.
He said Sri Lanka would seek another $500 million line of credit from India for fuel, which would be enough for about five weeks.
The government would also seek support from the Asian Development Bank, the World Bank and bilateral partners, including China, the United States, Britain and Middle Eastern countries.
“We know where we are and the only thing to do is fight back,” Sabry said. “We have no choice.”
Discussions are underway with China over a $1.5 billion line of credit, a syndicated loan of up to $1 billion and a request from the Sri Lankan president in January to restructure some of the debt.
“Hopefully we can get some relief that would help…until bigger infusions come in,” he said.
Beijing and New Delhi have long vied for influence over the island off India’s southern tip as the country moves closer to China under the powerful Rajapaksa family.
But in recent weeks, as the economic crisis deepened, Sri Lanka has relied heavily on aid from India.
“We are a neutral country,” Sabry said. “We are a friend of all.”
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Reporting by Devjyot Ghoshal and Uditha Jayasinghe in Colombo; Editing by William Mallard, Jason Neely and Mike Harrison
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