The visiting Sri Lankan team headed by Finance Minister Ali Sabry has made encouraging progress at the IMF discussions to get assistance for economic recovery and stability but their current attempt is not to secure a Rapid Financing Instrument (RFI) by the IMF, Minister Sabry said.
He said the current slow pace of discussions is something anticipated and urged the media to be cautious not to create panic among the people. “We have now set the wheels in motion and we will come out this situation stronger than ever,” the Minister said drawing parallels to a similar crisis faced by India in 1990s.
Relief from other international lending organisations and bilateral partners in response to the discussions held by the Sri Lankan team so far has been impressive. Minister Sabry said over 2 billion financial aid will start coming in from next week as a result of these negotiations.
The Government has already begun ‘fiscal regulation’ sought by the IMF to negotiate a possible bailout package. It includes achieving debt sustainability by restructuring country’s debt in consultation with bilateral lending partners like India, China, Japan and Paris Club creditors.
The Government needs to repay US$ 500m in May, another US$ 500m in June and US$ 1 billion in July, as external debts due for settlement.
In addition the Government is also negotiating with sovereign bond holders to restructure repayments, Minister Sabry told reporters after a series of talks including one with the IMF Managing Director Kristalina Georgieva in Washington DC.
Minister Sabry, Central Bank Governor Nandalal Weerasinghe, Treasury Secretary Mahinda Siriwardana and several other high profile officials are in Washington DC since early last week, attending back to back meetings with the IMF, World Bank and other key lending and humanitarian agencies to work out a strategy to overcome the worst economic crisis the country is facing in its recent history.
The Minister said the Covid-19 pandemic, Ukrainian war and rupee depreciation were the key factors behind the current crisis.
Speaking to media virtually from Washington DC, the Minister on Friday requested the politicians and the media to be sensitive to the grave crisis faced by the country today and refrain from playing politics at this critical hour.
“Our ship is in the midst of a hurricane, it is about to sink, if you have an issue with the captain, wait till the storm passes to deal with those issues. If the ship sinks, we all go down with it, not only the captain,” the Minister warned, urging the press and the politicians to stick to the truth without concocting lies to create panic among the people to gain petty political mileage.
He denied that India was asked by the IMF to give a guarantee to bail out Sri Lanka. “India is helping us in a major way to overcome the crisis and don’t upset that with lies,” he said.
Minister Sabry said he was honoured by the concern shown by the foreigners to Sri Lanka’s crisis and the ready advice and help received so far.
“An official whom I met here told me the story of her country Lebanon, how it plunged into darkness after going bankrupt. There will not be any winners left if that happens to Sri Lanka, this is no time to play politics, everyone must understand how serious the situation is in our country,” he stressed adding that they were not in the US to save the Government but to save the country.
The focus is to protect the banking system and the banking clearing system (the process of settling transactions between banks). “If that collapses, the country will be bankrupt,” he said.
The Sri Lankan team has had seven rounds of consultations with IMF representatives, including the IMF Chief and the Deputy Managing Director Gita Gopinath. The Minister has attended five of the meetings.
The Minister said it was unfair to blame the current Government for all the economic woes facing the country today. “This is the result of bad political decisions - unsustainable lending practices to fulfill political promises and lavish spending for over 70 years. The Easter Sunday attack, Covid-19, Ukraine war and rupee depreciation added up.”
The talks in DC are venturing into short term, midterm financial assistance as well as long term development plans for the country.
The Minister said the eminent members of the Presidential Advisory Group on Multilateral Engagement and Debt Sustainability Shantha Devarajan, Indrajith Kumrasamy and Sharmini Coorey were working full time to bail out the country from the present crisis and they are well respected in the international arena.
He said the next 9-12 months will be an extremely difficult time for Sri Lanka while the impact will be felt over a few years. “It will get worse before getting better. But we are here to make sure the situation will be reversed,” he added.